LOS ANGELES – Mercury Car Insurance, a significant player in the California auto insurance market, is facing a major legal challenge from the California Department of Insurance. Insurance Commissioner Ricardo Lara has announced a legal action alleging that Mercury Insurance has been illegally steering “good drivers” towards more expensive car insurance policies, violating consumer protection laws. This action follows a comprehensive investigation by the Department, uncovering multiple instances of harmful business practices across Mercury’s various insurance lines, including private passenger auto, homeowners, commercial auto, and commercial multi-policy.
The core of the allegation revolves around Proposition 103, a landmark consumer protection law passed by California voters in 1988. This proposition mandates a 20 percent discount on car insurance for “good drivers” – those with a clean driving record. However, the Department’s investigation suggests that Mercury Insurance attempted to circumvent this regulation by directing good drivers into higher-priced plans instead of offering them the lowest rates they were entitled to.
Commissioner Lara stated, “Failing to offer good drivers the most affordable car insurance policy they qualify for is against the law. Our Department is committed to protecting consumers and will seek maximum penalties against Mercury for their bad faith practices. Let this be a clear message to Mercury and any other insurance company attempting to bypass the law: such unfair and illegal actions will not be tolerated. We are here to ensure consumers receive the discounts they are legally entitled to.”
Mercury Insurance operates two subsidiaries in California: Mercury Insurance Company (MIC) and California Automobile Insurance Company (CAIC). MIC is designated for “good drivers” and offers lower premiums, while CAIC caters to a broader range of drivers with higher rates for essentially the same coverage. The Department of Insurance found evidence of Mercury illegally channeling drivers into the higher-cost CAIC policies through several methods:
- Agents were allegedly instructed to generate quotes using artificially low mileage figures for the higher-priced CAIC plan. This tactic created a misleading impression of lower rates initially, enticing consumers to opt for the more expensive mercury car insurance option.
- Agents were reportedly directed to deny access to lower-priced MIC policies to good drivers who had experienced policy cancellation due to non-payment or had been involved in not-at-fault accidents. Both of these practices are explicitly prohibited by law.
- A key disparity was observed in payment options, with monthly payment plans being offered exclusively for the higher-priced CAIC policies, potentially pushing customers towards the more expensive mercury car insurance plan due to payment convenience.
- Mercury allegedly discouraged good drivers from switching to the lower-priced MIC plan by using misleading comparisons between the two nearly identical policies. Phrases suggesting that the MIC policy offered “somewhat less coverage and more restrictive payment options” were used, despite the plans being essentially the same in coverage.
- The investigation revealed that Mercury falsely claimed that both MIC and CAIC plans included policy fees. In reality, only the higher-priced CAIC plan levied these additional fees, further increasing the cost for consumers unknowingly steered into this mercury car insurance option.
- Good drivers without prior insurance coverage were allegedly subjected to different, less favorable terms and conditions compared to other drivers, creating an uneven playing field within Mercury’s mercury car insurance offerings.
Beyond auto insurance, the Department’s allegations extend to Mercury’s practices impacting businesses and homeowners. The Department contends that Mercury overcharged these policyholders through various illegal and discriminatory practices. For example, premiums for commercial drivers were reportedly increased following not-at-fault accidents. Additionally, commercial drivers who had previously held a Mercury policy but did not meet a specific requirement of being listed as the named policyholder with another company for the preceding two years were unfairly treated as new drivers and charged higher premiums.
These allegations, totaling 34 specific points of non-compliance, are detailed in the Department’s formal Notice of Non-Compliance. This legal action is not the first time Mercury Insurance has faced scrutiny. In August 2019, Mercury was fined $27.6 million by the Department of Insurance – the largest penalty ever imposed on a property and casualty insurer by the Department. The California Supreme Court upheld this previous action, confirming that Mercury had charged consumers unapproved and unfairly discriminatory rates. Similar to the previous case, this new legal action against Mercury alleges numerous violations of Proposition 103, the voter-approved law designed to protect consumers from excessive and unfairly discriminatory insurance rates.
This ongoing legal battle highlights the California Department of Insurance’s commitment to enforcing consumer protection laws and ensuring fair practices within the insurance industry, particularly concerning mercury car insurance and related products. Consumers are encouraged to understand their rights and the protections afforded to good drivers under California law.
