A high-profile California insurance company that is backing a controversial insurance measure on the June ballot has engaged in practices that may be illegal, including deceptive pricing and discrimination against consumers such as active members of the military and drivers of emergency vehicles, according to a state report obtained by The Chronicle.
The report, obtained through the state Public Records Act, alleges that Mercury Insurance Group may have violated Proposition 103, the landmark consumer protection law approved by voters in 1988. The measure limited the cost of policies and made civil rights and antitrust laws apply to the insurance industry.
In its reporting, the state found evidence that Mercury may have violated state laws by:
-- Flagging some consumers for higher rates if they had been in an accident, even if it was not their fault.
-- Not immediately granting coverage to applicants including military personnel on active duty, "artists," those employed "in the entertainment industry as actors, dancers, etc.," and emergency vehicle drivers.
-- Raising insurance premiums after its sales agents quoted prices for discounts for which the consumer was not eligible. The department said this was the single largest category of complaints it received about the firm.
-- Collecting higher premiums than allowed by law by requiring its brokers to return part of their fees to the company.
-- Requesting information about customers' "national origin," a practice that the department said "could raise questions about the legality of Mercury's personal automobile policy cancellation and non-renewal decisions" under state law. Mercury agreed to block such data after the state investigators raised concerns.
"Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference," the state department wrote in a Feb. 20, 2009, legal filing related to its administrative case.
Since 2006, the state has fined Mercury $600,000 for violations based on its own examinations and for consumer complaints about the firm, state officials said.