Ensuring Insurance Inequity

A California ballot item would legalize practices Mercury has been fined for.

By Steve Lopez, THE LOS ANGELES TIMES

If you work as a bartender, junk dealer, longshoreman, actor or domestic worker, you might have had trouble getting home insurance from Mercury Corp. at one time or another.

And if you were a soldier who was transferred from one U.S. base to another, you might have been turned away when inquiring about car insurance.

Or so we are told in a 275-page report by the state Department of Insurance — dug up by the San Francisco Chronicle — which found widespread discriminatory practices and other infractions by Mercury from the mid-1990s until 2004.

Why exactly, you may wonder, would a housekeeper or longshoreman have trouble getting house insurance?

Hard to say. Maybe domestics are more likely to live in high-crime areas. But wouldn’t a longshoreman beat the burglars to a pulp and toss them back out on the street?

Even the two Mercury officials I spoke to Tuesday afternoon couldn’t quite explain it.

But spokesman Coby King and lawyer Doug Hallet did say they think Mercury has been unfairly battered the last few days in news accounts of that 275-page report.

According to Hallet, “These are not issues that evidence misconduct or dishonesty, which was why we settled for $300,000, which is well below what things can be settled for…”

That says a lot about the company, doesn’t it, trying to put a positive spin on a $300,000 fine for seven infractions of state regulations? Maybe Mercury could have run an ad during the Super Bowl:

“Mercury: We’re not as bad as you might think.”

True enough, not all the infractions were egregious, additional charges were dropped and some of the allegations by the state did not lead to legal action against Mercury.

Still, state examiners alleged that Mercury had violated Proposition 103, California’s landmark consumer protection law, inappropriately canceling policies and limiting access to preferable policies and rates.

Mercury — which has shelled out enough money in campaign contributions to own Sacramento outright — has also spent millions supporting Proposition 17, an initiative Californians will vote on in June that critics say would legalize some of the practices for which Mercury was fined.

If passed, Proposition 17 would require insurers to offer so-called “persistency” discounts to drivers who have good records and no lapse in coverage, which is a good thing for those people, naturally.

But under the misleadingly titled Continuous Coverage Discount Initiative, other drivers would be punished, according to the advocacy group Consumer Watchdog. If you have a lapse of 90 days or more in coverage for any reason other than foreign military service during a five-year period, you can be hit with a hefty surcharge.

Let’s say you move to New York, where you don’t need a car, and then move back to L.A. You could not only lose the discounted rate you had, but might have to pay a surcharge to get insurance at all.

Or maybe you’re temporarily transferred from Camp Pendleton to Camp Lejeune and leave the car behind, unused. When you get back home, you could lose your discount.

Kathy Fairbanks, a Proposition 17 spokeswoman, argued that under current law you already lose the discount in those circumstances and that under Proposition 17, you would at least be eligible to keep it.

Yes, but only at the “discretion of insurers.”

How do you feel about your chances?

“Any rating system that does not take into account the unique circumstances military personnel face in maintaining consistent auto insurance does them a disservice and is not acceptable to us,” said Michael Mattoch, a veteran and senior legislative counsel for USAA, a national insurance firm for soldiers and vets.

“Based on the potential harm to military personnel, we cannot support Prop. 17,” said Mattoch.

Another skeptic about the initiative is Joseph Mael, a Los Angeles therapist specializing in autism. Mael, who blogs for Santa Monica City Buzz, began his last posting like this: “Like many Californians, I was burned by Mercury auto insurance in the ’90s. After my rates went up, despite a ‘discounted’ quote by the agent, I was left wondering what, exactly, I had done.”

Mael told me that he had been in an accident he didn’t cause and that his premium had shot up. He has since switched carriers but said that based on his experience and Mercury’s full-throttle campaign for Prop. 17, he’s a skeptic.

“I think it’s deceptive,” he said of the initiative.

So do I, and I’m a Mercury customer for both car and home insurance. I must say that my rates are pretty good, but each time Mercury is in the news, my pride takes another beating.

Should I quit now, or just wait until Mercury adds my profession to the 26 listed in the report as “unacceptable” for home insurance?

Dancers, ironworkers, artisans, soldiers, garbage collectors and door-to-door salesmen are on the list. Doesn’t it seem that “columnists” belong somewhere in there, maybe between garbage collectors and door-to-door salesmen?

Contact the author at: [email protected]

By KGO-TV7 On Your Side – San Francisco, CA

There are major questions for a big auto insurance company over sky-high rates.

A 275 page California Insurance Commission report obtained by the San Francisco Chronicle is landing a damaging blow to Mercury Insurance, just as it fights to change California car insurance regulations.

The state found evidence that Mercury may have violated state laws by, according to the Chronicle, flagging consumers for higher rates if they had been in an accident, even if it was not their fault and collecting higher premiums than those allowed by law.

Mercury Insurance has spent millions of dollars on Prop 17 which would change the rules on car insurance.

Those opposed to Prop 17 say this shows what the company and the measure are really all about.

“Mercury Insurance company is one of those insurance companies that really wants to be able to discriminate against people it does not want to insure. It wants to figure out a way to avoid people it doesn’t want to insure and only insure those that will pay them the most money,” Harvey Rosenfield from Consumer Watchdog.

Late Monday afternoon, Mercury Insurance issued a response saying, “Consumer Watchdog’s latest attempt to mislead consumers and voters and attack Mercury is to rehash old allegations… Many… were dropped… because they were found to be without merit.”

The organization Yes on 17 says 80 percent of California drivers will benefit from its passage and voters will decide the issue on its merits.

By KGTV ABC TV-10NEWS (San Diego, CA)

SAN DIEGO, CA — To some, the proposed initiative known as the Continuous Coverage Auto Insurance Discount Act sounds appealing.

But consumer advocacy group Consumer Watchdog told 10News that potential voters should not be fooled. They said the initiative is a thinly veiled attempt to raise insurance rates.

“It’s a fraud, it’s full of deception, it will lead to higher insurance premiums,” said Harvey Rosenfield, founder of Consumer Watchdog group and author of Proposition 103, which overhauled the insurance market in 1988.

Rosenfield said that under the proposed initiative rates could go up for just calling and questioning coverage rules. After an accident, the driver who was not at fault could be penalized. Plus, he said, there would be penalties for letting insurance lapse, even for the unemployed or U.S. service members stationed in the United States.

The language of the proposal was just approved by the California Attorney General. Now, a signature gathering campaign has begun.

“It’s going to be appearing at a supermarket near you where paid signature gatherers are going to be paid 75 cents to $1 to confuse you into signing that initiative on the ballot,” Rosenfield said.

There may also be confusion over who is behind the measure because it’s signed by Christina Wilson, proponent. However, Rosenfield said that it is really sponsored by auto insurance giant Mercury Insurance and its billionaire chairman George Joseph.

Kathy Fairbanks of Californians for Fair Auto Insurance Rates said that Rosenfield is being misleading. Fairbanks said that the initiative will allow drivers to keep the continuous coverage discount even if they switch insurance companies. She agreed Mercury Insurance is the sole financial backer at this point, but said the measure will also be supported by consumer groups, seniors and small businesses.

Rosenfield said it’s an attempt to roll back consumer gains from Prop. 103, and he said Insurance Commissioner Steve Poizner should speak out against the measure.

Poizner, interviewd by 10News, said “It’s definitely worth being skeptical” of insurance company-backed initiatives.

Asked if he would take a position on the initiative, Poizner said, “We’re going to finish our analysis first and then depending on how it turns out we’ll see if I just inform the voters or I weigh in or not. But I need to finish the analysis first.”

By Carla Marinucci, THE SAN FRANCISCO CHRONICLE

Federal and state lawmakers called Monday for a closer examination of Mercury Insurance Group in the wake of a state report that suggests the firm may have engaged in illegal practices, including deceptive pricing and discrimination against military personnel and people in other occupations.

The document from the office of State Insurance Commissioner Steve Poizner, reported on by The Chronicle Monday after the newspaper obtained it through the state Public Records Act, said the company may have repeatedly violated Proposition 103, the landmark consumer protection law passed by voters in 1988.

According to the state report, Mercury did not immediately grant coverage to applicants including artists, emergency vehicle operators and military personnel.

“I am concerned that some California insurers may have discriminated against soldiers and veterans by charging them higher premiums,” U.S. Rep. Loretta Sanchez, D-Garden Grove Orange County, a member of the House Armed Services Committee, said Monday.

“We should be celebrating the service of our men and women in uniform, not penalizing it.”

Sanchez vowed to “ensure that the appropriate state and federal authorities take action to guarantee that our soldiers and veterans are protected against this type of abuse.”

At the same time, two Democratic Assemblymen who are running for insurance commissioner said they intend to closely examine the state’s findings and determine what needs to be done.

Assemblyman Dave Jones, D-Sacramento, called the 275-page state report “very disturbing.”

“It would appear that in many cases, consumers were being taken advantage of,” Jones said, adding that he is concerned that the firm may have engaged in “bait and switch” pricing and discrimination “against people in a particular industry – such as artists, actors, dancers.”

Jones said he would review the report and talk to other lawmakers about “the possibility of oversight on this issue.”

Assemblyman Hector De La Torre, D-South Gate Los Angeles County, said, “There seems to be a pattern and practice of these behaviors by Mercury – so the million-dollar question is … what is the Department of Insurance doing to control this? It’s not at all clear what they did to remedy the situation.”

In a statement Monday, Mercury officials dismissed the report, the state’s most recent completed investigation of the firm from 1998 to 2004, saying consumer groups were trying to “mislead consumers and rehash old allegations.”

“Many of these allegations were dropped from the final report because they were found to be without merit,” the company said. Its agents and employees are “committed to providing our customers with the best insurance value possible and unsurpassed service and care.”

Consumer Watchdog, a leading advocacy group, Monday called on Navy Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, to investigate whether Mercury may be discriminating against military personnel by supporting Proposition 17 on the June ballot.

The measure, known as the “Continuous Coverage Discount Initiative,” would affect millions of consumers with automobile insurance.

Harvey Rosenfield, the founder of Consumer Watchdog and author of Prop. 103, told reporters that the state examination is an indictment of the firm.

He said he asked Mullen to examine whether Prop. 17 would allow Mercury to charge higher rates to U.S. military members who do not maintain continuous car insurance coverage while serving their country at home – say, at boot camp – a practice that is illegal under Prop. 103.

Kathy Fairbanks, who represents Californians for Fair Auto Insurance Rates, which supports Prop. 17 with $3.5 million in backing from Mercury, said the initiative is supported by military groups including the American GI Forum and the Republican Veterans Association because it would lower costs for military personnel and other state consumers.

Poizner, a Republican candidate for governor, continues to investigate Mercury, the parent firm to the state’s third-largest auto insurance firm, which serves 10 percent of the state market.

His office is involved in an administrative action against Mercury for alleged noncompliance on an issue dating back to 1998 that surfaced in the state report.

Since 2006, the state has fined Mercury $600,000 for violations based on its own examinations and on consumer complaints about the firm.

State officials told The Chronicle that they uncovered 25 different issues of concern in the company’s practices in their studies that date back to 1998 – seven of which remain unresolved.

By Steven Harmon, SAN JOSE MERCURY NEWS

SACRAMENTO, CA — Mercury Insurance Corp. has a history of discriminatory practices against an array of groups, including military personnel, that led to unfair surcharges or outright denial of coverage, according to a 275-page report released by the Department of Insurance.

The document, which is being used as part of an administrative case the department is building against the company, was touted Monday by a leading consumer advocate as proof that Mercury intends to “legalize what is now illegal,” with Proposition 17, the ballot measure underfunded largely by Mercury.

“The breadth of Mercury’s discrimination against people is really astonishing to me,” said Harvey Rosenfield, founder of Consumer Watchdog and author of Proposition 103, the 1988 voter-approved law that governs insurance rates. “Here you have an insurance company that broke the law (that is now) using the people’s initiative power to pass a measure that would penalize people just because they didn’t have coverage or had a lapse in coverage.”

A spokeswoman for Proposition 17, Californians for Fair Auto Insurance Rates, said past charges against Mercury are unrelated to the ballot measure.

“We’re talking about a preliminary report issued six years ago that reviews things that are 12 years old which have no bearing on Proposition 17,” said Kathy Fairbanks.

A Department of Insurance spokesman said it stood by its report, and noted that the department has fined Mercury $550,000 in the last five years for claims handling practices and underwriting violations.

“We do market conduct exams every five years at least and will continue to examine their behavior,” said Darrel Ng. “We will continue to be tough on them and any insurers who do not follow the rules.”

The release of the document in late January by Insurance Commissioner Steve Poizner could have gubernatorial campaign implications. Poizner is running for governor as a GOP candidate, while presumed Democratic nominee Jerry Brown, as attorney general, has been criticized for writing a favorable title and summary for Proposition 17. Brown has received $13,000 in contributions from Mercury.

Consumer Watchdog sent a letter to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, requesting an investigation into Mercury’s policies toward members of the armed services.

Specifically, the internal Department of Insurance report found that Mercury refused to cover, or make policies available to, military personnel.

“When an American insurance company is unjustly and perhaps illegally targeting men and women who are willing to shed blood for our country, we believe the Joint Chiefs of Staff should investigate the matter and take official action to stop further discrimination by the company against American troops,” the letter said.

Fairbanks said the military is better off under Proposition 17 than under current law, saying that if a member of the military discontinues insurance in another state, he or she can get the continuous coverage discount when moving back to California. But that’s at the discretion of the insurer.

In cases dating back to the 1990s through 2004, the Department of Insurance cites numerous instances in which Mercury overcharged, canceled, refused to sell insurance or made insurance more difficult to buy. Customers who were in the military, were unmarried adults living together, had jobs in the entertainment industry, were artists, longshoreman, “domestics” and other “unacceptable” occupations, were refused coverage, the report said.

In many of the cases, Mercury claimed to have corrected the problems, but follow-ups showed they hadn’t, according to the department’s report.

The company charged penalties or surcharges to drivers who had prior accidents that were not the driver’s fault, for traffic violations when the customer was not convicted or who had no prior insurance coverage or who had lapses in coverage.

Mercury required that some diabetics, cardiovascular patients and people who “suffered from some other medical condition” would be denied coverage unless they provided Mercury with a medical examination report.

People who worked out of their homes, had one source of income, or were self-employed and working out of their homes would face hurdles in obtaining coverage.

Mercury also refused to provide immediate coverage to people who were unemployed. Underwriters for Mercury were encouraged with incentives to deviate from company rules to reject certain applications. And Mercury overcharged policyholders by denying them discounts they were entitled to, the report said.

Reach Steven Harmon at 916-441-2101.