10 Reasons Not to Trust Mercury Insurance's Billionaire Chairman
State regulators describe Mercury Insurance as an abusive, anti-consumer company.
The California Department of Insurance recently made this statement before an Administrative Law Judge in an agency enforcement action against Mercury:
Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference.
- See key pages from that brief here. (See, particularly, page 4.)
- Read the “Notice of Noncompliance” in the administrative proceeding filed by the Department of Insurance here.
- See more information and documentation on the widespread discrimination practiced by Mercury Insurance here.
Mercury illegally surcharged hundreds of thousands of drivers until it was ordered to stop in 2005.
For years, Mercury Insurance illegally overcharged hundreds of thousands of California drivers hundreds of dollars per year, until they were forced to stop in the wake of a Court of Appeal decision in 2005.
Mercury was sued by its customers for this illegal charge (Donabedian v. Mercury), but continued to impose the surcharge even as it was lobbying Sacramento to delete the prohibition from California’s insurance reform law, Proposition 103.
An internal training manual produced in a civil trial shows Mercury Insurance trained employees to mistreat, neglect and even threaten customers who file claims.
A portion of the instructional guide was disclosed as part of a 2006 lawsuit against the company by a Los Angeles business that sued Mercury for failing to properly pay a claim. During the lawsuit, a Mercury employee asserted that the company no longer uses the training manual.
The unanimous decision came last week after jurors were shown internal training guides instructing Mercury adjustors to low-ball customers, drag out their claims and remind them they could be found at fault in a trial. Amerigraphics Inc. v. Mercury Casualty Company BC331524 (L.A. Super. Ct., Feb. 21, 2008).
Read the Daily Journal article about the lawsuit here.
Mercury had to be forced by a California court to stop its insurance agents from charging illegal broker fees to unsuspecting customers.
In 2003, the San Francisco Superior Court found that Mercury was deceiving customers through its advertising by suggesting that consumers would pay less for auto insurance from Mercury than from other insurance companies. What its ad campaign failed to disclose was that Mercury customers (unlike the comparison companies) would often be required to pay an additional broker fee that is illegal under California law, driving up the actual price. The court issued an injunction ordering Mercury to change its practices.
- Read the judge’s conclusions about how Mercury deceived customers here.
- Read the judge’s refusal to lift the injunction against Mercury over this practice here.
In 2008, Mercury paid the California Department of Insurance a quarter-million dollar settlement for alleged claims handling violations.
The California Department of Insurance investigated Mercury’s claims handling practices, a matter Mercury settled by paying $250,000 (plus the Department’s enforcement and legal costs) and agreeing to pay more penalties if they didn’t improve their practices in six months. The Department of Insurance explained the problem with Mercury in a June 2008 news release:
Read the Department of Insurance news release here.
Mercury Insurance was ordered by Florida regulators to pay $2 million to consumers and $1 million to the state for improperly denying legitimate claims and repeatedly flouting the law.
The examination found a multitude of violations relating to Mercury’s business practices including the unwarranted termination of policies upon the filing of a claim, failing to pay the full amount on covered claims, failing to deliver policies within 60 days, failing to provide specific reasons for denial of claims, and the use of unappointed agents. However, it was the use of unfiled forms and rates to improperly deny claims that the Office considered to be the most egregious violation.
- Read the Florida Office of Insurance Regulation release here.
- Read the insurance publication Best Week story “Florida Orders Mercury General Units to Pay More than $2 Million to Policyholders” here.
According to a smoking gun document, Mercury pays its repair shops incentives to use aftermarket parts.
Mercury offers auto repair shops incentives — up to $750 — to use aftermarket and reconditioned parts and penalizes its repair shops for using original manufacturer parts. Incentivizing repair shops to use inferior parts when repairing policyholders’ cars endangers policyholders even if it may save Mercury money and increase profits.
Read the document here.
Mercury Insurance has a long history of trying to thwart consumer protections and the will of the voters in the state legislature and on the ballot.
Ever since California voters enacted the landmark insurance reform initiative Proposition 103 in 1988, Mercury Insurance has led a series of efforts to undermine or repeal its consumer protections.
Over the years Mercury has sponsored at least eight bills in the California Legislature to repeal or override key consumer protections approved by the voters. These include attempts to gut the 20% Good Driver Discount requirement, to re-impose discriminatory ZIP Code-based auto insurance pricing, to add new surcharges on customers, and to prevent courts and the Insurance Commissioner from ordering refunds when insurers violate the law.
Read more about Mercury’s efforts in Sacramento to dismantle Prop 103 here.
Mercury has also tried to go to the ballot in order to strip Californians of consumer protections. The 2010 initiative is not Mercury’s first attempt.
In 2006, Mercury proposed an initiative to gut other parts of California’s landmark insurance reform measure, Proposition 103. It would have allowed, among other things, insurers to rate drivers primarily on their ZIP Code rather than driving safety record. After sparking a public outcry, the proposal was withdrawn. Read the Los Angeles Times article describing Mercury’s 2006 attempt to attack Proposition 103 here.
Mercury Insurance is a leader among California auto insurers in one respect: political contributions.
Over the past ten years, Mercury has given more money directly to California state politicians and to California political parties than any of the four other largest auto insurers (State Farm, Farmers, Allstate, and Auto Club of SoCal), according to data available from the California Secretary of State. In fact, just considering donations directly from these insurers, Mercury has given more to individuals and parties between 1999 and 2008 ($2,746,600) than all four companies combined ($2,266,750), even though State Farm, Farmers and Allstate are substantially larger insurance corporations.
Download a spreadsheet summarizing the donations by California’s largest auto insurers here and a pivot table for a detailed comparison at here.
The Wall Street Journal reported that in January, California Department of Insurance (CDI) officials in January threatened Mercury and five related insurance units with fines. Authorities alleged that some of Mercury’s independent brokers improperly charged customers fees, mostly for the purchase of auto-liability and property-damage coverage. According to Joseph, the fines were put on the back burner during a meeting between Mercury and department officials.
Chuck Quackenbush resigned in disgrace later that year in the wake of this and other improprieties that were revealed in the news media. A decade later, Mercury is finally facing a Department hearing on the broker fee practices that were going to be the subject of the canceled 2000 proceeding. (See #1 above.)
Mercury Insurance and its Chairman have been mentioned during two FBI investigations into California political corruption.
In 1991, when the FBI was investigating corruption in the California Capitol that later led to the imprisonment of State Senator Alan Robbins and insurance lobbyist Clay Jackson, wiretaps of conversations between the two often referred to Mercury’s founder and Chairman George Joseph. In one frank exchange, Mercury’s chief was suggested as a possible donor, because he needed some legislative help from the Senator in his campaign to undermine provisions of Proposition 103, the voter approved reform initiative:
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