Mercury Insurance Ends Fight with California Regulators by Agreeing to Pay Over $41M

Mercury Insurance Co. just ended a 20-year long battle with California regulators over extra fees charged to its clients by agreeing to pay the state of California over $41M, according to officials. The State Insurance Commissioner Ricardo Lara says it has been the most substantial property and casualty penalty and interest payment in the history of the California Insurance Department. The settlement came as a result of the state Supreme Court’s rejecting to hear Mercury Insurance’s appeal from a lower court decision.  

Mercury has protected millions of California homeowners since 1962 and has been one of the United States’ most trusted insurance companies. According to them, they are also California’s fourth-largest private passenger auto insurer. They have assets over $4 billion and provide coverage to customers in other states including Florida, New Jersey, Arizona, Illinois, Nevada, Oklahoma, Virginia, and Texas. The company had defended their actions back on Wednesday calling the appeals court decision unreasonable.  They also said that the fees were disclosed to customers being collected by independent agents, and not Mercury Insurance.

Mercury had decided to put an end to the decade-long dispute to the best interests of its clients, stakeholders, and employees. The company had advertised its rates were lower than the competition, even though they were higher. So, agents had an incentive to have their policies with Mercury, although policies with competitors were cheaper for the customer. In other words, Mercury was misleading consumers, which led to the undercut of competitors and placed them above the competition.

The $41.2 million settlement comprises $8.1M in interest and $5.5M payment to settle an allegation linked to dishonest advertising that had not gone to trial. It was a rough legal battle to protect consumers and ensure that all insurance companies comply with state laws. The original fine for closing the case was $500,000 since the actual $27.6 million was paid, and the rest was costs and interest related to the case.

The funds will go to California’s general fund. Approximately $5M will be used to reimburse an insurance fund used to carry out California insurance laws, which means Mercury Insurance paid for court costs and other legal expenses.

Mercury’s agents were acting on behalf the company and not providing legally compliant services to its clients. They knew they were putting themselves in a position where they will be imposed penalties but chose not to align their comportment with state laws. Thus, the law catches up to them.