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Mercury Fined $27.5 Million for Illegal Auto Insurance Charges: Victory for California Consumers

After over six years of litigation, Levy and Consumer Watchdog have prevailed in their case against Mercury Insurance Company for allowing Mercury agents to charge California consumers millions in illegal “broker fees” on Mercury car insurance. On January 7, 2015, Insurance Commissioner Dave Jones adopted the 62-page recommendations of Administrative Law Judge Michael Scarlett, ordering Mercury to pay $27,593,562 in fines for willfully violating the Insurance Code by allowing Mercury insurance agents to charge the unapproved fees from 1999 through 2006.

The Commissioner’s penalties against Mercury represent the largest fine for an auto and home insurance company in California’s history and mark a major victory for California consumers.

Levy served as lead trial counsel in the nearly three-week long administrative trial in 2013. Levy represented Consumer Watchdog, which intervened in the case in support of the Department of Insurance. Pamela Pressley and Laura Antonini of Consumer Watchdog served as co-counsel, with Ms. Antonini co-counseling throughout the trial.

Proposition 103, passed in 1988, requires car insurers to obtain pre-market approval of their insurance premiums from the Department of Insurance. Mercury evaded Department premium regulation by allowing Mercury agents to charge the unapproved “broker fees.” Judge Scarlett found that Mercury created a sham “broker” system in an attempt to get around the law and to facilitate the illegal fees. Consumers were required to pay between $100 to $150 in “broker fees” in order to get an auto insurance policy from Mercury, mounting into the tens of millions of dollars of illegal payments to Mercury agents.

Mercury stopped the practice in 2009 as a result of the injunction Levy obtained in the Krumme v. Mercury litigation. Broker fees were repaid to hundreds of thousands of Mercury insurance customers through the AIS Settlement in 2009.

Click here to see the Insurance Commissioner’s Order Approving the Proposed Decision.

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