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 occurred.
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.

CLICK HERE for full copy of investigation.

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