SACRAMENTO — The California insurance
industry recently lost another battle against a law that protects
consumers against excessive rate hikes when the California Court of
Appeal upheld a lower-court ruling in a challenge brought by Mercury
Casualty Co. and industry lobbying groups.
According to Consumer
Watchdog founder Harvey Rosenfield — who wrote the voter-approved
Proposition 103 that bars insurance companies from hitting consumers
with excessive rate charges and passed-through unjustified expenses,
according to a news
release — insurance rates in the state were
skyrocketing in the mid-1980s.
“California was the only state
without the power to control major racketeering,” Rosenfield told
the Northern California Record.
Rosenfield said insurance
premiums in the state are now less than they were before the law was
passed by voters in 1988.
According to a Consumer Watchdog news
release, Mercury was ordered in 2013 by
Insurance Commissioner Dave Jones to lower its overall homeowner’s
insurance rates by 5.4 percent, representing a savings of $16 million
in annual premiums to consumers.
Mercury and industry trade
associations representing State Farm, Allstate, Farmers and other
insurance companies filed a lawsuit, claiming the order violated
their rights of fair profits and freedom of speech.
Superior Court disagreed with Mercury and the industry groups, and
the Court of Appeal upheld that ruling on Feb. 10.
Watchdog said the appeals court called the plaintiffs’ arguments
“hocus pocus” and “smoke and mirrors — nothing
Rosenfield said the lawsuit was frivolous and represented
the industry’s attempt to “get a redo.”
probably the single-worst auto insurer in California, and I don’t
say that lightly,” he said. “They just won’t obey the
Rosenfield said he would not be surprised if Mercury and
the trade groups continued to appeal, but that “the likely result
is that they’re all done.”
However, Mercury spokesman Shane
Smith told the Northern California Record that “(w)e
disagree with the decision and are considering an appeal to the
California Supreme Court.”
Smith also clarified that Mercury is
not challenging Proposition 103 as a whole, just the specific element
related to the rate decrease, and that any appeal would only involve
the case tied to that issue.
Rosenfield said consumers lose in
lawsuits like the one filed by Mercury.
have to pay for all of these legal machinations,” he said. “The
insurance industry is trying to use the court system to evade the
will of voters.”
Consumer Watchdog said
Proposition 103 has saved California consumers more than $100 billion
since its passage.
“This latest attack by Mercury and the
industry’s lobbying groups is yet another failed attempt to
overturn the California consumer protection rules that have saved
consumers billions of dollars over the last 28 years while allowing
insurers to earn fair profits,” Consumer Watchdog senior attorney
Pamela Pressley, who argued the appeal, said in the release.
consumer group said Mercury applied for an overall 8.8 percent rate
increase on its homeowner’s insurance line in 2009. The group
subsequently “discovered that Mercury was trying to sneak into its
rate increase nearly a million dollars’ worth of political
contributions and lobbying expenses” and “wanted to make its
policyholders pay for non-insurance related advertising expenses,”
which are barred under Proposition 103.