Mercury Casualty Co., based in Los Angeles, is in trouble with California insurance regulators. Our San Francisco insurance lawyers noticed a news story earlier this month regarding Mercury’s proposed rate hikes on their homeowner’s insurance policies.
Mercury had asked to raise rates on these policies by 7.3 percent. A California administrative judge rejected that proposed increase. Then, after a public hearing on the issue, California Insurance Commissioner, Dave Jones, used his powers to determine that the proposed rate hike was excessive. The Commissioner has these powers due to a 1988 law requiring the Commissioner’s approval for property and casualty insurance rates, or allows for his rejection, as happened this month. Mercury complained in their legal filings that their homeowner’s insurance has the lowest rates in the state, but Commissioner Jones argues that Mercury based those statistics on old data and incorrect legal and factual conclusions. Consumer Watchdog, an insurance consumer advocacy organization, told reporters that Mercury had “ample opportunity to justify its requested rate hike”, both this one and the previous request for an 8.8 percent increase, and they have failed to convince anybody, including the Commissioner and the judge.
In fact, Commissioner Jones is ordering Mercury to implement a rate decrease of 8.2 percent, so even more than they were proposing to increase rates by. Due to this ruling, now Mercury is suing to stop the Commissioner from forcing these rate reductions for 270,000 policyholders in California. The case is in Sacramento County Superior Court and Mercury claims these reductions would total $16.5 million if allowed to go through. Commissioner Jones responded to this case by saying, “I have directed the Department of Insurance to vigorously defend against Mercury’s effort to deprive homeowners of this rate decrease.” He also asserted, “The rate reduction provided for in this decision would offer much-needed financial relief for homeowners and would no doubt help consumers keep more of their hard-earned dollars in today’s tight economy.”