Mercury Insurance’s History of Legislative Attacks on Consumer Protections in California

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Ever since California voters enacted the landmark insurance reform initiative, Proposition 103 in 1988, Mercury Insurance has led a series of efforts to remove its consumer protections.

Mercury’s push to chip away at Proposition 103 has been nearly constant since soon after the measure’s passage.  Here is a timeline of the major anti-consumer bills Mercury has sponsored.

1993 – Mercury sponsored legislation to gut Proposition 103’s Good Driver Discount provision. The bill, SB 957 (Johnston), was described by the Department of Insurance in a letter opposing Mercury’s bill:

SB 957 would have the effect of repealing one of the primary provisions of Proposition 103 — the benefit of a 20% discount for objectively defined Good Drivers.

Read the Legislature’s bill analysis identifying Mercury as the bill’s sponsor here.

1995 – Mercury sponsored AB 341 (Knowles) to gut Proposition 103’s rule prohibiting the discriminatory practice of "territorial rating," that is, basing rates on drivers’ ZIP codes rather than driving records. Read the Legislature’s bill analysis identifying Mercury as a bill sponsor

1996 – After AB 341 failed, Mercury sponsored SB 1433 (Peace), and tried again with SB 1433 in 1996. The Sacramento Bee, in an editorial opposing this bill, explained:

Unfortunately, the long-awaited consumer-friendly regulations could be nullifiedby SB 1433, a bill by Sen. Steve Peace, that is pending in the Senate Judiciary Committe. The Peace measure would bar the commissioner from assigning weights to the various factors used in setting rates.  In practical terms that means that the insurance companies would be back in the driver’s seat.  They would be free to set rates based on factors that they could choose, and many Californians in urban areas would continue to be priced out of the market, thereby increasing the number of uninsured motorists.

Read the Legislature’s bill analysis identifying Mercury as the bill’s sponsor.

2001 – Mercury sponsored AB 1488 (Chavez) to allow auto insurance companies to charge customers more if they file a claim, even if the driver was not primarily at-fault for the accident.  According to the Legislature’s bill analysis (which identifies Mercury as the bill’s sponsor), the Department of Insurance opposed the bill, because:

This bill could discourage consumers from filing a claim with their insurance company for a minor incident, if they are concerned about losing the claim-free credit or receiving a premium increase.

Although the bill never passed, Mercury has incorporated elements of it into a pending ballot measure it proposed in July 2009.  For more about this initiative click here

2002 – Mercury proposed SB 689 (Perata), to allow auto insurance companies to charge higher rates to customers who have had a lapse in insurance coverage or are buying auto insurance for the first time.  This bill, which would have dismantled a key provision of Prop 103, was vetoed by then Governor Gray Davis after, as the San Jose Mercury News reported:

Consumer activists called Tuesday for Gov. Gray Davis to return what they denounced as a "shameless” $25,000 contribution from Mercury Insurance, made as the company is lobbying the governor to sign a measure that would help the firm’s business.

2003 – After the defeat of SB 689, Mercury sponsored SB 841 (Perata), to allow the same penalty on drivers with a lapse in coverage or without prior auto insurance.  The same year, Mercury sponsored AB 1297 (Frommer), to circumvent a court ruling that found Mercury Insurance allowed its agents to impose illegal fees on customers.  In a story titled "Insurer Uses Its Muscle on 2 Bills," the Los Angeles Times reported

A Los Angeles insurance company that has contributed millions of
dollars to California politicians over the years is trying to use its
influence with lawmakers to overturn regulatory and court decisions
that threaten its financial interests.

Bills sponsored by
Mercury Insurance Group, one of California’s largest automobile
insurers, unanimously passed committees in both houses of the
Legislature on Wednesday despite strong opposition from consumer groups
and the state’s Department of Insurance.

SB 841 passed the Legislature and was signed into law by then-Governor Davis, who received at least $175,000 in campaign contributions from Mercury within weeks of signing the bill. The law, however, was struck down in the California Courts as an illegal amendment to Proposition 103.

Read the Sacramento Bee story reporting that SB 841 was invalidated here.

2008 – Mercury sponsored AB 1051 (C. Calderon) to prohibit a Court or Insurance Commissioner from ordering a company to pay refunds when it is found to have violated Proposition 103. The bill was defeated.

Read the Legislature’s bill analysis identifying Mercury as a bill sponsor here.

2009 – After AB 1051 failed, Mercury sponsored a similar bill, AB 1054 (Coto) in 2009.  The Assembly Judiciary committee’s official analysis of the bill explained AB 1054 as follows:

This bill, while allowing consumers to challenge prospective application of rates, appears to provide absolute immunity from retroactive damages – refunds – to an insurance company that
charged consumers a rate that was excessive or otherwise
illegitimate, but was nonetheless approved by the IC [Insurance Commissioner]. In other
words, this bill appears to prevent an insurance company from
having to refund payments that either the IC or a court
determines are excessive.

Read the the bill analysis identifying Mercury as the bill’s chief supporter here.

As the San Jose Mercury News reported:

[Assemblyman Joe] Coto recently wrote a controversial bill sponsored by Mercury Insurance
Group, which gave $3,000 to the assemblyman. The measure would have
made it harder to force auto insurers to pay customers refunds when
their rates were shown to be illegally excessive.

The bill has been held over for a potential 2010 hearing by its author, Assemblyman Joe Coto. 


Consumer Watchdog
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