Mercury Insurance Charged with Violating California Insurance Statutes;
May Have Illegally Overcharged Consumers, State Reports
April 12, 2010
The California Insurance Commissioner announced today that an examination
found that Mercury Insurance has violated the state insurance statutes
and as a result, Mercury Insurance may have illegally overcharged
thousands of Californians for auto and homeowners insurance.
"As the head of the state's largest consumer protection agency,
I must ensure that insurance companies fulfill their obligations
and follow state law," said Commissioner Steve Poizner. "However,
an examination done by the Department of Insurance appears to show
that Mercury Insurance has disregarded California's consumer protection
statutes and overcharged consumers. In addition, the Department's
examination finds that Mercury Insurance has apparently continued
to violate the law despite agreements with the state to terminate
its illegal behavior."
The California Department of Insurance conducted a Market Conduct
Exam covering the period of March 1, 2007 to May 31, 2007. During
that timeframe, the agency says it found that Mercury Insurance
Group, comprising Mercury Insurance Company, Mercury Casualty Company
and California Automobile Insurance Company, violated the insurance
code, resulting in consumers being overcharged or denied coverage.
The 35 categories of alleged violations include:
1. Mercury Insurance failed to correct violations of state law
indentified by the Department of Insurance from exams conducted
in 1998 and 2002.
2. Mercury did not collect the right information about a driver's
prior accidents during its auto insurance application and underwriting
process to make sure that surcharges are only applied for those
accidents where the insured is at fault, and to make sure people
are not charged for bodily injury accidents when no injuries had
3. The auto insurance applicant is required by Mercury Insurance
to provide "lifetime" experience regarding certain major
convictions, while the law only allows insurers to charge for such
convictions for "10 years" for specific alcohol-related
offenses and "three years" for the others.
4. Homeowners' insurance premium credits were not being consistently
applied when they were due, resulting in insureds being overcharged.
5. Mercury's auto insurance non-renewal notices and procedures required
the Good Driver to take additional steps, beyond what is provided
for in the law, to obtain coverage when another person on the policy
no longer qualified for coverage.
6. Mercury's auto insurance underwriting guidelines required individuals
with certain medical impairments to undergo additional underwriting
scrutiny before a policy could be issued.
7. Mercury barred from coverage people in certain occupations --
Bartender, Liquor Store Owner, Painter, Cocktail Waitress/Waiter
and Artists - who didn't meet additional underwriting standards
that were not applied to people in other occupations.
Mercury Insurance Group has 10 days to correct each violation found
in the latest exam, according to information from the state's insurance
commissioner, and, if the violations are not be corrected, Mercury
Insurance Group faces a $5,000 fine for each violation and an additional
$5,000 fine for each violation if it is found to be willful.
HERE for full copy of investigation.
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