California Supreme Court Upholds $27.5 Million Penalty Against Mercury Insurance

On August 16, the California Supreme Court denied an appeal by Mercury and thus upheld a $27.5 million fine issued by the Department of Insurance against Mercury Insurance Company.  The California Court of Appeals previously denied the appeal on May 8, as reported in a May 10 Westmont Wire.

The Department of Insurance found Mercury to be in violation of Proposition 103 due to its charging unapproved agents fees of $50 to $150 in addition to Mercury’s approved rates to over 180,000 automobile insurance customers. Mercury collected these charges from September 1999 to August 2004 and attempted to justify them by incorrectly claiming that their agents were actually brokers. The Department found that merely labeling these agents as brokers did not change their status under Prop 103. They concluded that the scheme violated consumer interests by incentivizing agents to place business through Mercury instead of competitors.

For any questions about the California Insurance Department’s decision, or for inquiries regarding compliant agency and broker strategies, licensing and contracting please contact Westmont Associates.