Mercury Casualty Co., a subsidiary of L.A. insurance giant Mercury General Corp., suffered a setback in its years-long effort to raise homeowners insurance rates last week when a Sacramento Superior Court judge turned down its petition to stay an order reducing rates by more than 8 percent.
California Insurance Commissioner Dave Jones said the ruling meant the order, scheduled to go into effect in June, would save 270,000 consumers more than $16.5 million.
“This is a significant legal victory in our fight to ensure insurance rates are not excessive,” he said in a statement. “The (rate reduction) provides much needed financial relief for homeowners and helps consumers keep more of their hard-earned dollars in today’s tight economy.”
The commissioner’s office was given the authority to regulate insurance rates after the passage of Proposition 103 in 1988. Mercury Casualty, which handles homeowners’ property damage claims, first applied to raise its rates in 2009 and has been challenging the commissioner’s authority to regulate insurance rates ever since. That litigation is ongoing.
After a lengthy public hearing process that concluded late last year, an administrative law judge ruled against Mercury Casualty’s requested hike, finding instead that the insurer should lower rates by almost 8.2 percent.
In February, after Jones expressed his intent to enforce the recommended rate reduction, Mercury Casualty responded by filing an appeal in Sacramento, arguing that its rates were among the lowest in the state and that Jones based his decision on outdated data. The suit claimed a reduction would deprive Mercury Casualty of the right to earn a fair rate of return.
In declining Mercury Casualty’s request to postpone the rate reduction until after the litigation over the insurance commissioner’s jurisdiction was resolved, the Sacramento court essentially upheld an earlier L.A. court ruling giving Jones authority to reduce the insurer’s homeowners rates.
Pamela Pressley, litigation director for Consumer Watchdog in Santa Monica, praised the judge’s decision.
“Mercury was given ample opportunity to explain why it needed to raise rates on consumers, but their claims did not stand up to scrutiny,” she said in a statement.
But while Mercury Casualty lost the battle, the war continues.
In a statement to the Business Journal, the company said it was disappointed with the court’s decision, but confident that on appeal a judge will ultimately find in favor of the company on the underlying issue of the scope of the insurance commissioner’s authority.
“Once the Superior Court reviews the evidence, we believe it will reverse the Commissioner’s decision and allow Mercury to implement rates that allow a fair rate of return,” the statement said.
