Mercury Insurance ordered to pay $27.5 million in fines

Mercury Insurance - Lawsuit - Gaval

A California appeals court has ruled in favor of reinstating the penalties against the insurer.

In California, a state appeals court has reinstated a fine of $27.5 million in penalties against Mercury Insurance Co. The ruling from earlier this week was the outcome of a case accusing the insurer of charging illegal broker fees.

The auto insurance company charged illegal broker fees in 180,000 transactions with its customers.

The fees were charged to customers from 1999 through 2004. The fines against Mercury Insurance were originally imposed by the California Department of Insurance in 2015. That said, those same fines were overturned by an Orange County judge in 2016. At that time, the judge stated that the fees had been legally assessed for the services insurance brokers were providing to their customers, for example, comparison shopping.

However, in Santa Ana the Fourth District Court of Appeal said that the brokers in question were actually Mercury-employed insurance agents. The court ruled that those individuals did not provide customer services and were not in the position to legally charge fees.

The new ruling decided that Mercury Insurance was unfairly approving discriminatory fees.

According to Justice David Thompson in the 3 to 0 ruling, if Mercury’s actions had been permitted, it would allow insurance agents to pose as brokers who “could charge unapproved and unfairly discriminatory fees for alleged separate services that would increase consumers’ cost of insurance.” Thompson went on to say “This is contrary to the voters’ intent as expressed in Proposition 103.” Proposition 103 was an initiative from 1988 which required that the state provide its approval for auto, property and casualty coverage rates.

From 1999 to 2004, the insurance company charged customers fees ranging from $50 to $150. The $27.5 million fine is the largest the Insurance Department has ever applied to a home or auto insurance company, according to a S.F. Chronicle report.

Consumer Watchdog applauded the ruling. That advocacy group was a Proposition 103 sponsor and sided with the California Insurance Department in defense of the fines against Mercury Insurance.

“After over a decade of battling against Mercury’s aggressive litigation tactics seeking to evade accountability for its Mercury Insurance - Lawsuit - Gavaldeceitful ‘broker fee’ over charges, today justice has finally prevailed,” said Pam Pressley, Consumer Watchdog’s lawyer in the case against Mercury Insurance.

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