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Mercury Insurance must pay nearly $27.6 million over auto insurance “broker fees,” California Insurance Commissioner Dave Jones announced this week.
Mercury didn’t get permission from the agency to charge the fees, violating Proposition 103 rules requiring the commissioner to sign off on all rates, according to a release from Jones’ office.
“The Company is highly disappointed and strongly disagrees with the Insurance Commissioner’s determination that Mercury violated California’s rate laws and with his decision to impose a penalty,” Mercury said in a statement. “It is our strong belief that this decision is contrary to California’s rate laws, due process, and basic notions of fairness. The Company intends to vigorously litigate this matter of law and we expect to ultimately prevail on the merits in a court of law.
According to Jones, his office even “advised against” the fees, but Mercury collected them anyway. The fees were about $100-$150, the Chronicle reported, and were attached to 180,000 transactions from 1999 to 2004 and resulted in $27,593,562 million.
“While the $27.5 million fine against Mercury is significant, it is commensurate with the amount of money that was unlawfully collected from Mercury policyholders,” Jones said in a statement.
According to Jones, while brokers can charge fees, Mercury’s “brokers” were really acting like agents and therefore that expense had to be treated as part of its rates by the state.