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Voters Defeat Proposition 17, The Mercury Insurance Initiative

June 9th, 2010

NEWS RELEASE

CONTACT: Doug Heller, 310.392.0522 x309; or Naomi Seligman, 310.392.0522 x318

Stunning Upset in $16 Million Campaign to Scam California Drivers

Santa Monica, CA – Ignoring a deceptive $16 million campaign by Mercury Insurance Company, California voters rejected a ballot measure that would have amended 1988 insurance reform Proposition 103 to allow insurance companies to impose surcharges on motorists who were not previously insured or had a break in coverage for virtually any reason. A majority of Californians voting against Proposition 17, despite ads promising $250 premium reductions.

“Once again, David defeated Goliath,” said Harvey Rosenfield, author of Proposition 103, which mandated stringent rate regulation and was passed by voters in 1988 despite an $80 million campaign against it by the insurance industry.

“Californians asked themselves when was the last time an insurance company spent $16 million to save consumers money, and the answer was clear: never. California voters refused to be duped by corporations using the people’s initiative process to enrich themselves at the expense of consumers.” Proposition 17 would have legalized surcharges banned by Proposition 103.

Campaign for Consumer Rights, which led the campaign against Mercury, was outspent approximately 12 to 1. Campaign for Consumer Rights is the campaign affiliate of the nonpartisan, nonprofit organization Consumer Watchdog.

Voters Reject Corporate Takeover of Initiative Process

Consumer advocates hailed the defeat of the Mercury Insurance initiative as proof that California voters do not intend to allow insurance companies or other big corporations to subvert the initiative process. The campaign in support of Prop 17, which was run by the corporate political consulting and advertising firm of Goddard Claussen, lost despite spending about $15 million more than the Stop Prop 17 campaign.

“Mercury spent millions on advertising, PR hacks, and paid spokespeople posing as consumer advocates, senior and business leaders, but the voters saw through the scam,” said Rosenfield. “Like PG&E’s measure, Prop 17 is the initiative that money could not buy.”

The campaign against Prop 17 produced and aired a 15 second television ad and one radio ad, that it developed with its small team of experts, including Chris Lehane, Ace Smith of SCN Strategies and Lisa Grove of Grove Insight.

“The consumer advocates’ vanquishing of the Mercury Insurance initiative scam is a powerful win for consumers and puts a horse’s head into the collective beds of the insurance industry,” said Chris Lehane, an advisor to the Stop Prop 17 campaign.

The consumer advocates opposing Prop 17 worked with a limited budget and a broad coalition. The California Nurses Association, Consumer Attorneys of California, Consumer Federation of California, Brave New Films, VoteVets.org, Consumers Union, California Alliance of Retired Americans, USAA, California Labor Federation, California Democratic Party and hundreds of organizations, groups and individuals joined in active opposition to the well-funded insurance company campaign.

“We are extremely grateful to all the voters, organizations, editorial boards, campaign experts, activists and online friends who took this battle seriously and sent a strong message to companies that want to buy laws through our initiative process,” said Doug Heller on behalf of the Stop Prop 17 campaign.

Group Sees Legal Actions Against Mercury

Consumer advocates noted that over the last five months, state regulators have released documents showing that over the last fifteen years, Mercury Insurance Company repeatedly violated state law, overcharging and discriminating against members of the military, the self-employed, people who worked out of their homes, and consumers who had health problems. Legal documents showed that Mercury also discriminated against those whose last names were difficult to pronounce.

“Mercury should not be allowed to do business in California, much less sponsor a ballot initiative,” said Rosenfield. “We will take all necessary action to make sure this renegade company complies with state and federal laws.”

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Stop Prop 17 sponsored by Campaign for Consumer Rights  - a coalition of consumer advocates, nurses and consumer attorneys.

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Consumer Group Warns of Mail Fraud from Insurance Industry Campaign for Prop 17

June 4th, 2010

NEWS RELEASE

Contact: Doug Heller, 310-392-0522, ext. 309; or Naomi Seligman, 310-392-0522, ext. 318

Desperate Mercury Insurance Dumps Another Million into $16 Million Campaign and Distributes Last Minute Mailer from Phony “Consumer Coalition”

Santa Monica, CA — Facing a surge of voter opposition in the last few days of its campaign for Proposition 17, sponsor Mercury Insurance injected another $1 million dollars into its campaign to fund last-minute mailings and advertising that conceal the insurer’s support and feature a fraudulent “Consumer Coalition of California.”

Click here to view the mailer.  To date, Mercury has donated $16 million to fund the Prop 17 campaign.

The so-called “Consumer Coalition of California” whose name appears on the Prop 17 mailer is run by a Texas woman, Virginia Jarrow, who has repeatedly sided with industry. All legitimate consumer groups in California, including, Consumers Union, Consumer Watchdog and Consumer Federation of California oppose Propositon 17.  The Mercury funded mailers also fail to identify Mercury as an insurance company in state mandated disclosures. The disclosure on the mailers state: “Paid for by Yes On 17-Californians For Fair Auto Insurance Rates And Mercury General Corporation And Affiliates.”  Mercury Insurance’s corporate parent, Mercury General Corporation, doesn’t have “insurance” in its name.

“This is a consumer fraud,” said Harvey Rosenfield, founder of Consumer Watchdog. “Mercury Insurance Company is trying to put one over on the voters by sending out mailings in the name of a consumer coalition that does not exist. All legitimate consumer groups in California oppose 17 because it will allow insurance companies to raise auto insurance premiums.”

Mercury Insurance has been paying other front groups for their “support.”

Californians for Fair Auto Insurance Rates (Cal-FAIR)

Mercury Insurance has paid hundreds of thousands of dollars to Bicker, Castillo & Fairbanks, a public relations firm, to create a front group called Californians for Fair Auto Insurance Rates or CAL-FAIR.  The chief spokesperson for CAL-FAIR, Kathy Fairbanks, is a communications consultant and partner in the firm that runs campaigns for several different corporations and interest groups.

Consumers First, Inc.

Jim Conran is listed as the co-chair for Californians for Fair Auto Insurance Rates (Cal-FAIR)/Yes on 17 campaign. As head of something he calls Consumers First, Inc. (which doesn’t appear to be incorporated or have a website), Conran has been paid tens of thousands of dollars by the Prop 17 campaign to help Mercury Insurance try to deceive voters on the measure.  Prop 17 is not his only deception. Mr. Conran is a pay-for-play PR professional who is paid by industry executives to run several front group projects.

Kirk West

Kirk West, a co-chair of CAL-FAIR, has already made over $30,000 as a paid spokesman for Mercury Insurance’s campaign on Prop 17. He was formerly the President of the Chamber of Commerce and is now a gun-for-hire for industry executives.

Prop 17 would penalize Californians who opt to stop driving for a time, for virtually any reason. Voters would be required to pay up to a $1,000 more dollars a year for auto insurance when they sought to restart coverage.

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Campaign for Consumer Rights is the campaign affiliate of the nonprofit Consumer Watchdog and the sponsor of Stop Prop 17  - http://www.StopProp17.org

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Corporate Funded Senior Group – ­Used by Insurers In Prop 17 Campaign – Now Laundering Insurance, Industry Money in Candidate Elections

June 3rd, 2010

NEWS RELEASE

Contact: Doug Heller, 310-480-4170, or Naomi Seligman, 310-392-0522, ext. 318

FPPC Complaint Filed Against “California Senior Advocates League PAC” For Failing to Disclose Its Sole Funders – Big Corporate Political Action Committees

Santa Monica, CA – The Campaign for Consumer Rights (CCR) has filed a complaint with the Fair Political Practices Commission (FPPC) about the nearly $320,000 that the California Senior Advocates League PAC appears to have laundered for big insurance companies and other corporations. The corporate groups are using the purported senior group to avoid disclosing the true funding behind the tv ads and attack mailers that have become pervasive in San Diego in the final weeks before the election.

CCR’s complaint against the Senior Advocates PAC shows that the front group created a political action committee just last month to funnel money from insurance and other industry funded groups to elect Juan Vargas and defeat Assemblywoman Mary Salas, candidates in the Democratic primary for Senate District 40 in San Diego.

The so-called senior group has also been prominently listed in mass campaign mailings as a supporter of Prop 17, to hide the $15 million Mercury Insurance has spent to promote the initiative to raise car insurance rates.  Mercury Insurance is the largest individual corporate donor to one of the two political action committees funding the Senior Advocates PAC.  A timeline of the Senior Advocates PAC’s contributions and expenditures is below.

“Insurance companies and other big corporations are secretly trying to influence the results of the election in San Diego by funneling money through a group that sounds a lot more trustworthy to voters than big insurance, big tobacco and big oil,” said consumer advocate Doug Heller.  ”Big industry wants to win its agenda in Sacramento, and they’re using illegal money laundering tricks to do it.”

On May 18th, the day it was created, the Senior Advocates PAC began receiving funds from two corporate PACS and immediately spent the money on independent expenditures against Assemblywoman Mary Salas and in favor of Juan Vargas.  The two corporate PACs funneling money through the so-called “Senior Advocates” are “JobsPAC, A Bi-Partisan Coalition of California Employers” and “Put California Back To Work Sponsored By The Civil Justice Association Of California.” JobsPAC is this largest overall funder of Put California Back and Mercury Insurance’s $50,000 contribution is the largest from an individual corporation to Put California Back.

In the letter to the FPPC, Heller wrote: “Unless the committee is ordered to cease and desist and immediately comply with the Political Reform Act, it will continue to provide false information to the voters for the purpose of hiding the actual sources of funds in connection with expenditures in Senate District 40.”

The complaint details how the Senior PAC and others involved in this scheme appear to be violating Government Code sections 84301 and 84302, related to disclosing the true source of funds, and possibly section 84506, related to disclosures in advertisements.  The complaint can be downloaded at http://bit.ly/cSuxUU

In addition to laundering money on behalf of the two corporate PACs, Senior Advocates, incorrectly describes JobsPAC as a “coalition of employEES” rather than “employERS” in its campaign filings, which only adds to the deception about the source of these funds.   On May 28, the Senior Advocates PAC also made a $103,000 independent expenditure against John Laird who is running to fill the Senate seat vacated by Lieutenant Governor Abel Maldonado.

Timeline of the Contributions Received and Expenditures Made by California Senior Advocates League PAC (CSAL PAC)

CSAL PAC Formed as a committee: 5/18/10

CSAL PAC Received from JobsPAC $5,000            5/18/10

CSAL PAC Received from Put California Back to Work $15,000          5/19/10

CSAL PAC Mailer opposing  Mary Salas                                $9,517.62       5/19/10

CSAL PAC IE to Oppose Mary Salas                                    $28,353.80     5/20/10

CSAL PAC Received from JobsPAC:                                    $94,000           5/21/10

CSAL PAC Made to Working Families for Vargas  $100,000         5/24/10

CSAL PAC IE to Oppose Mary Salas                                    $ 1,250.00       5/24/10

CSAL PAC Received from Put California Back to Work $100,000         5/27/10

CSAL PAC Received from JobsPAC                                    $100,000        5/28/10

CSAL PAC Made to Working Families  for Vargas   $100,000         5/28/10

CSAL PAC IE to Oppose John Laird                                    $103,000         5/28/10

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Campaign for Consumer Rights is the campaign affiliate of the nonprofit Consumer Watchdog and the sponsor of Stop Prop 17  - http://www.StopProp17.org.

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Consumer Report: Insurance Industry Spending Over $17 Million to Influence Outcome of June 8th Election

June 2nd, 2010

NEWS RELEASE

Contact: Doug Heller, 310-392-0522, ext. 309

Santa Monica, CA — Insurers and the political action committees they fund have spent more than $17 million dollars on candidates and one ballot initiative to quietly influence the outcome of Tuesday’s election, according to a new analysis released today by Campaign for Consumer Rights.  The consumer group noted that voters are unlikely to know from the populist-sounding names of the insurance company-funded committees and front-groups that insurers are spending millions to win their agenda.

Los Angeles and San Diego voters are the primary targets of the industry’s stealth independent expenditure efforts to win legislative races.  Insurer-backed groups have spent more than $600,000 against one Assembly candidate in Los Angeles’s South Bay — Betsy Butler in Assembly District 53 — and more than $1.47 million  against one San Diego State Senate candidate — Mary Salas in Senate District 40 — and for her opponent Juan Vargas.

Statewide, the largest insurance company expenditure is the $14.9 million that California’s 3rd largest auto insurer, Mercury Insurance, has spent to pass Proposition 17, which would legalize surcharges on consumers outlawed since 1988.

“Insurers are spending millions of dollars to influence the outcome of Tuesday’s election, but most voters don’t know insurance companies are out there propping up initiatives and attacking candidates,” said consumer advocate Doug Heller, who prepared the analysis.

Consumer advocates said that the insurance funded groups are campaigning under names that would not lead most voters to believe that the mailers, phone calls and TV ads are actually paid for by the insurance industry.

The Mercury Insurance campaign for Prop 17 has been operating under the moniker “Californians for Fair Auto Insurance Rates.”  The insurance industry dominated Civil Justice Association of California (CJAC) has funded three separate campaign committees.  Two medical malpractice insurance company-funded committees have also spent hundreds of thousands of dollars campaigning for and against candidates for the state legislature.

These are the major insurance industry campaigns impacting the June election (a breakdown of spending in each district is also below):

Yes On 17-Californians For Fair Auto Insurance Rates And Mercury General Corporation And Affiliates
Mercury Insurance — whose corporate parent, Mercury General Corporation doesn’t have “insurance” in its name, but is the entity referenced in mandatory advertising disclosures — has funded 99% of Yes on 17’s campaign.  Prop 17 would penalize Californians who opt to stop driving for a time, for virtually any reason.Voters would be required to pay up to a $1,000 more dollars a year for auto insurance when they sought to restart coverage.

Civil Justice Association of California (CJAC)
CJAC, whose board of directors has substantially more insurance representation than any other industry, has three separate political committees that have spent a combined $1.75 million on just three California primary races:

* “Put California Back To Work Sponsored By The Civil Justice Association Of California” has spent about $1,267,000 combined in Assembly District 53 (all against candidate Betsy Butler) and Senate District 40 (in support of candidate Juan Vargas and against Assemblywoman Mary Salas).  Prop 17 sponsor Mercury Insurance is the largest individual corporate donor to this committee, having given $50,000 to “Put California Back.”

* “Californians For Balance And Fairness In The Civil Justice System, Sponsored By The Civil Justice Association Of California” has spent about $422,000 in Assembly District 53 (all against candidate Betsy Butler), Assembly District 30 (all against candidate Fran Florez) and Senate District 40 (in support of candidate Juan Vargas).

* “Californians For Civil Justice Reform Pac, Sponsored By The Civil Justice Association Of California” has spent more than $62,000 in Assembly District 53 (all against candidate Betsy Butler) and Senate District 40 (in support of candidate Juan Vargas).

Medical Malpractice Insurance Companies
Medical malpractice insurance companies have been very aggressive this campaign season.  This segment of the insurance industry is focused on electing candidates who will vote against changes to California’s stringent limits on legal rights for patients injured by medical malpractice.

“Cooperative Of American Physicians Independent Expenditure Committee” is the political action committee of the medical malpractice insurer known as Mutual Protection Trust.  This committee has spent more than $385,000 in Assembly Districts 20 (in support of candidate Garrett Yee) and 53 (against candidate Betsy Butler and in favor of candidate James Lau).

“Californians Allied For Patient Protection Independent Expenditure Account” is the political action committee of CAPP, a group largely funded by medical malpractice insurance companies that focuses on the state’s malpractice laws.  It has spent more than $317,000 in Assembly Districts 20 (in support of candidate Garrett Yee and in opposition to candidate Bob Wieckowski) and 53 (all against candidate Betsy Butler).

“It’s not enough that insurance companies charge us an arm and a leg at every turn. They want more. Insurers are moving millions into California campaigns in order to return many times their investment back into their coffers through preferable legislation and initiative results,” said Heller.

Below is a breakdown of insurance funded independent expenditures by legislative race:

Senate District 40 – In Support of Juan Vargas
$917,000 – Put California Back to Work Sponsored By The Civil Justice Association Of California
$164,000 – Californians For Balance And Fairness In The Civil Justice System, Sponsored By The Civil Justice Association Of California
$43,000 – Californians For Civil Justice Reform Pac, Sponsored By The Civil Justice Association Of California

Senate District 40 – In Opposition to Mary Salas
$343,000 – Put California Back to Work Sponsored By The Civil Justice Association Of California

Assembly District 53 – In Opposition to Betsy Butler
$165,000 – Put California Back to Work Sponsored By The Civil Justice Association Of California
$16,500- Californians For Balance And Fairness In The Civil Justice System, Sponsored By The Civil Justice Association Of California
$19,000 – Californians For Civil Justice Reform Pac, Sponsored By The Civil Justice Association Of California
$221,000 – Cooperative Of American Physicians Independent Expenditure Committee
$186,000 – Californians Allied For Patient Protection Independent Expenditure Account

Assembly District 53 – In Support of James Lau
$39,000 – Cooperative Of American Physicians Independent Expenditure Committee

Assembly District 30 – In Opposition to Fran Florez
$81,500 – Californians For Balance And Fairness In The Civil Justice System, Sponsored By The Civil Justice Association Of California

Assembly District 20 – In Support of Garrett Yee
$125,000 – Cooperative Of American Physicians Independent Expenditure Committee
$161,000 – Californians Allied For Patient Protection Independent Expenditure Account

Assembly District 20 – In Opposition to Bob Wieckowski
$8,000 – Californians Allied For Patient Protection Independent Expenditure Account

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Campaign for Consumer Rights is the campaign affiliate of the nonprofit Consumer Watchdog and the sponsor of Stop Prop 17  - http://www.StopProp17.org.

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Mercury Insurance Pours Another $3.5 Million Into Deceptive Prop 17 Campaign

May 21st, 2010

NEWS RELEASE

CONTACT: Naomi Seligman, 310-392-0522, ext. 318; or Doug Heller, ext. 309

Insurance Company Behind Rate Increase Initiative Now In For $13.8 Million

Santa Monica, CA – Mercury Insurance has poured another $3.5 million into the campaign for Prop 17, the car insurance rate increase initiative on the June ballot, as it escalates its television ad buy in the final weeks of the campaign.  Mercury has now spent approximately $13,840,000 on Prop 17.  The remaining $60,000 or so to the campaign appears to come almost exclusively from Mercury agents.

“Mercury thinks that all it has to do is keep throwing money into the deceptive ad campaign for Prop 17 to pass this car insurance rate hike initiative,” said Doug Heller with Stop Prop 17.  “Insurance companies don’t spend millions of dollars on an initiative to save consumers money and we hope voters will see through Mercury Insurance’s phony promises and vote no on 17.”

Prop 17 would create an insurance surcharge on drivers who have had a lapse in car insurance coverage for virtually any reason during the past five years, or whose policy was cancelled after missing a single payment. Under the measure, people who stopped driving and didn’t need insurance for a time would be required to pay up to a thousand dollars more for car insurance when they sought to restart coverage. Currently, insurance companies are prohibited from imposing such a surcharge in California.

Prop 17 is opposed by California’s consumer groups, including Consumers Union, the publisher of Consumer Reports Magazine, Consumer Watchdog and Consumer Federation of California, and nearly every editorial board in the state.

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

Stop Prop 17 is sponsored by Campaign for Consumer Rights, a nonprofit organization.  Campaign for Consumer Rights does not endorse or oppose any candidates for election.

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Mercury’s New Deceptive Mailer: Military Members Must Not Be ‘Responsible’ Drivers

May 21st, 2010

NEWS RELEASE

Contact: Naomi Seligman, 310.526.0747; or Doug Heller, 310.392.0708

Santa Monica, CA – The insurance company sponsor of Prop 17 is peppering the state’s voters with new mailers that tell our military servicemen and women that they are not responsible drivers if they serve their country stateside without a car. Consumer advocates fighting Prop 17 said the flier, which promises “Lower rates for responsible drivers,” denigrates our nation’s military, only because they don’t bring their car to base while on duty.

Click here to download a pdf of the mailer:
Page 1.
Page 2.

“The insurance company backers of Prop 17 are saying that people like servicemen and women who don’t drive while on base are irresponsible if they drop car insurance during their service,” said Brian Van Riper, Iraqi war veteran and retired Lance Corporal, US Marines. “What’s irresponsible is this insurance company initiative to punish good drivers who have done nothing wrong.”

Prop 17 would create an insurance surcharge on drivers, including soldiers, who have had a lapse in car insurance coverage for virtually any reason during the past five years, or whose policy was cancelled after missing a single payment. Under the measure, people who stopped driving and didn’t need insurance for a time would be required to pay up to a thousand dollars more for car insurance when they sought to restart coverage. Currently, insurance companies are prohibited from imposing such a surcharge in California.

Prop 17 is opposed by military, consumer and citizen groups including VoteVets.org, USAA, Consumers Union, Consumer Watchdog, Consumer Federation of California, and California Alliance of Retired Americans.

The San Diego Union-Tribune in its rejection of Prop 17 wrote:

…there are two reasons to have sharp doubts about Proposition 17.

The first is that Proposition 17 is a perfect example of the deplorable way the state initiative process is used by private companies for their own benefit.

The second has to do with the fact that a member of the U.S. military would not be protected from losing his or her “continuous coverage” discount if transferred within the United States. The protection extends only to those transferred abroad. This is why the United Services Automobile Association, an insurer which specializes in military families, strongly opposes Proposition 17.

Especially in a time of war – and especially as the newspaper of a community with such a rich history and relationship with the U.S. armed forces – we find this very difficult to accept.

For this reason, we recommend a “no” vote.

The campaign in favor of Prop 17 is 99% funded by insurance companies, with Mercury Insurance having spent over $10.3 million to date.

Doug Heller with Stop Prop 17 said today, “Mercury has just added insult to injury. First they propose Prop 17, which allows insurance companies to surcharge military members a thousand dollars a year, then they cast servicemen and women as irresponsible and not deserving of consumer protections. Good drivers, in or out of the service, should reject Prop 17.”

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

Stop Prop 17 is sponsored by Campaign for Consumer Rights, a nonprofit organization.  Campaign for Consumer Rights does not endorse or oppose any candidates for election.

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Mercury Insurance Agent: “If I could not pronounce a name, I should not write that person”

May 20th, 2010

NEWS RELEASE

CONTACT: Naomi Seligman, 310.617.4577; or Doug Heller, 310.480.4170

Mercury Agents’ Declarations Confirm Government Findings of Discrimination; Company Didn’t Want to Insure Diabetics, Middle Eastern Drivers or Women Married to Younger Men: Mercury’s “Cougar” Clause

Santa Monica, CA – The campaign against Prop 17 released documents today revealing that Mercury Insurance, the initiative’s sole sponsor, required its agents to withhold auto insurance policies from military personnel, diabetics, women married to younger men, and drivers thought to be of Middle Eastern descent even if they had good driving records.

The declarations from three former insurance agents, obtained by Consumer Watchdog, corroborate key findings regarding discriminatory practices at Mercury from a series of California Department of Insurance (CDI) investigations released earlier this year.

“Every week there’s a new revelation about how Mercury illegally discriminates against its customers and targets Californians with higher car insurance rates.  Now Mercury wants voters to pass Prop 17 and give insurance companies new power to raise rates,” said Doug Heller with the Stop Prop 17 campaign.

Two of the agents were employed by Auto Insurance Specialists (AIS), which was one of the largest Mercury agencies at the time and is now owned by Mercury. A third was employed by another Mercury agency. The insurance agents’ declarations were made in the late 1990s at about the same time the California Department of Insurance (CDI) was investigating wide-ranging discrimination by Mercury.  Last month the CDI filed an administrative lawsuit against Mercury for approximately 35 illegal practices as well as for failing to correct the unfair rating practices over the past 15 years despite prior agreements to do so.

According to one of the agents, Michael Feldman:

[Mercury Insurance underwriting managers] Ms. Norris and Ms. Harris directed [AIS Agency branch manager] Mr. Heywood to instruct me that I could not write “poor caliber risks” such as diabetics, salvaged cars or middle easterners for any Mercury insurance policies, including Proposition 103 good driver policies…with regard to middle easterners, they stated that if I could not pronounce a name, I should not write that person.

California law prohibits auto insurance companies from considering the national origin or medical condition of good drivers when deciding whether or not to sell an insurance policy. Under the 1988 insurance reform measure Proposition 103 insurance companies are required to offer their best-priced policy to any customer who qualifies as a good driver.  .

Another former agent, Joseph Falmer, stated:
http://www.consumerwatchdog.org/resources/FeldmanOCRHighlightedComments.pdf

Mercury employees stated to me on numerous occasions that Mercury’s “unwritten rules” mandated that Proposition 103 was to be ignored if a Proposition 103 “good driver” fell in to any of the following categories: diabetes, heart condition, physical impairment, born in another country (especially the middle east), hispanic, non-citizen, students (especially those who have not lived in the United States for 10 years), residents of territory 54 (South Central Los Angeles), over the age of 72, military, self-employed and working out of the home…

Former agent Richards Barger, Jr. added on Mercury’s “Cougar” Clause:
http://www.consumerwatchdog.org/resources/CougarClause.pdf

There were rules regarding what I call household composition, husband and wife age differences. In other words if a – if the husband was, much younger than the wife, we couldn’t entertain the account.

The detailed declaration of Mr. Falmer places the decision to illegally refuse to do business with the targeted segments of the population right at the desk of Mercury’s founder George Joseph.  According to Falmer:

[Falmer's superior at the AIS agency] would blame George Joseph, Mercury’s founder, saying “Mr. Joseph is really upset with the risks this office has been submitting.  Let’s not rock the boat.”

The description of illegal discrimination by the agents closely tracks the findings from a series of CDI investigations of Mercury that were revealed earlier this year. The investigations found evidence that Mercury would mark members of the military with a “U” for Unacceptable in certain cases and would subject people with diabetes and heart conditions, as well as unemployed and self-employed Californians, to different standards that made it more difficult or more expensive for those people to get insurance.  Information about the regulatory investigations is available here: http://www.consumerwatchdog.org/insurance/articles/?storyId=33774

The agents’ declarations have been submitted by Consumer Watchdog in a government case, in which the CDI is prosecuting Mercury for illegally allowing its AIS agents to charge broker fees to customers.  That practice was identified in the CDI report as one of the many illegal activities of Mercury Insurance.

Another illegal practice the CDI investigation identified was Mercury’s system of surcharging drivers who did not have auto insurance at some point in the past.  Such a surcharge is prohibited under Proposition 103, but it would be allowed by Proposition 17 on the June ballot.

Proposition 17 would allow insurance companies to increase premiums for drivers who had a break in insurance coverage for more than 90 days during the past five years.  It would force good drivers to pay higher premiums even if they weren’t driving when they did not have insurance coverage.

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

Stop Prop 17 is sponsored by Campaign for Consumer Rights, a nonprofit organization. Campaign for Consumer Rights does not endorse or oppose any candidates for election.

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Another Prop 17 Deception Uncovered: Mercury Trying To Raise Rates Even As It Promises Prop 17 Discounts

May 17th, 2010

NEWS RELEASE

CONTACT: Doug Heller, 310.392.0708, or 310.526.0747

Mercury Asking Dep’t of Insurance for $32 Million Rate Hike On Its Car Insurance Policyholders; Company Would Recoup All Its Money From $10 Million Prop 17 Campaign If Rate Hike is Approved

Santa Monica, CA – Mercury Insurance, the sponsor of Prop 17, is pushing regulators to allow a $32 million rate increase for California drivers insured by the company and its affiliates. The company is quietly seeking the rate hike even as it is spending $10 million on a deceptive ad campaign trying to fool voters into believing that Prop 17 would lower car insurance costs.  The non-profit organization Consumer Watchdog has challenged the proposed rate hike, saying the company has played fast and loose with data in an attempt to improperly raise rates and should actually be lowering prices by 11% for policyholders.

“Mercury Insurance is spending millions to try and convince voters that Prop 17 would lower premiums, while it’s working behind the scenes to jack up car insurance rates before the election,” said Doug Heller with Stop Prop 17.  ”If Mercury raises rates by $32 million, it would recoup every dime spent on its deceptive campaign for Prop 17, with policyholders picking up the tab.”

Consumer advocates have slammed Mercury’s rate hike proposal as excessive and improper.  Among other problems with the company’s plan, Mercury has changed the actuarial formula it selected to use when it became apparent the originally selected formula would result in lower rates.  The company originally argued, in 2008, that it should look back at two years worth of data to determine future trends and claimed it was due a rate increase as a result.  But when, in late 2009, the data indicated that the two-year trends would lead to a rate decrease, the company suddenly changed its position and argued for the right to use five years of data to determine its future trends.

“As with Prop 17, Mercury doesn’t care about the facts, it just looks for any angle to squeeze more money out of drivers,” said Heller.

If approved as Mercury has proposed, the rate hike would force its insured drivers to pay an average of about $145 more than they should, based on Consumer Watchdog’s calculations.  The Department of Insurance has not made a decision on the proposal.

S&P Downgrades Mercury’s Ratings

The ratings agency Standard & Poor’s has downgraded Mercury’s financial strength rating of the company.  Among other reasons, S&P cited “its business concentration in California” and the fact that “in its home state of California, Mercury faces keen competition.”  Mercury’s Prop 17 gambit is an effort to improve its bottom line in California, on which so much of the company’s profits rely.  Mercury claims that Prop 17 is needed to make California a competitive market, but consumer groups opposed to Prop 17 point out that Prop 17 would actually limit availability of auto insurance for millions of drivers and that California, as reinforced by this S&P analysis, is currently one of the most competitive car insurance markets in the country.

The Stop Prop 17 campaign noted that not only is Mercury wrong in claiming California is not a competitive insurance market, the proposed rate hike shows that Mercury plans on using Prop 17 to bolster its bottom line not create savings for drivers.

The Department of Insurance analysis of Prop 17 makes it clear that if insurance companies were to provide even minimal discounts to customers, others customers would necessarily face surcharges.  In response, Mercury and its representatives have, on several occasions, attempted to refute this analysis by suggesting that instead of imposing any surcharges under Prop 17, insurance companies would lower everyone’s rates so nobody would be punished.  This rate increase shows, instead, that the opposite is more likely true.  Rather than lowering rates to avoid surcharging drivers as Prop 17 would require, Mercury plans to increase rates ahead of Prop 17 to avoid giving any customers any real discounts.

“The insurance company promising that Prop 17 will give drivers discounts is actually trying to raise its customers’ premiums first.  Only an insurance company like Mercury could try and sell a policy as worthless as that,” said Heller.

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

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Consumer Advocate Warns San Diegans About Insurance Industry’s Ballot Box Attacks

May 13th, 2010

NEWS RELEASE

CONTACT: Harvey Rosenfield, 310-345-8816; or Naomi Seligman, 310-526-0747

Insurance Companies Spending Millions On Prop 17, $735K on SD Senate Race

San Diego, CA — Long-time insurance reformer Harvey Rosenfield is in San Diego today, traveling with a red emergency beacon, to warn voters to be aware of what the insurance industry is trying to get away with on the ballot this June.  Rosenfield will highlight the $10 million spent by Mercury Insurance to pass the auto insurance rate hike initiative Prop 17 and more than $735,000 spent by insurance companies and associated political committees in the Democratic primary to replace San Diego State Senator Denise Ducheny.

The insurance company campaign for Prop 17 has become a David versus Goliath battle over whether or not insurance companies should be given new power to raise premiums on drivers.  The sponsor of 17, Mercury Insurance, is blanketing the television and radio airwaves with deceptive ads through election day. Consumer groups fighting 17 have a small budget and a limited ability to buy expensive television commercials.

“You’ve got an insurance company that has already spent $10 million and could spend another $10 million,” said Harvey Rosenfield with the Campaign for Consumer Rights, which is sponsoring the effort to stop Prop 17.  “They’ve been carpet-bombing the state with ads. We’re just throwing a rock back with a sling shot.”

The opponents point out that despite the insurance company’s massive financial advantage, nearly every newspaper in California has weighed in against Prop 17 as well as all the state’s consumer protection groups such as Consumers Union, the nonprofit publisher of Consumer Reports.  If enacted, Prop 17 would allow car insurance companies to increase premiums for drivers based on their history of purchasing auto insurance. Such a surcharge has been illegal in California for more than 20 years.

Insurance industry trying to buy San Diego senate seat, too

Rosenfield noted that Prop 17 isn’t the only insurance-sponsored effort on the ballot.  The industry is aggressively campaigning for insurance executive Juan Vargas (a former Assemblyman) in the race for California’s southern-most Senate seat.  Vargas helped shepherd a legislative version of Prop 17 through the Assembly when he has chairman of the Insurance Committee in 2003.

Property and casualty insurance companies and the Civil Justice Association have waged a massive campaign to elect Vargas and defeat his competitor Assemblywoman Mary Salas.   The Civil Justice Association, whose board of directors has substantially more insurance representation than any other industry, has spent $613,333 in independent expenditures in support of Vargas as well as $61,963 against Salas.  Additionally, Vargas has received more than $60,000 from auto, home, medical malpractice and other insurers, including $2,000 from Prop 17 sponsor Mercury.  Salas has received about $4,000 from similar sources.

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

Stop Prop 17 is sponsored by Campaign for Consumer Rights, a nonprofit organization.  Campaign for Consumer Rights does not endorse or oppose any candidates for election.

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Consumer Watchdog Urges SEC to Investigate Undisclosed Nepotism At Mercury Insurance – Chief Actuary Is CEO’s Nephew

May 11th, 2010

NEWS RELEASE FROM CONSUMER WATCHDOG

Contact: Naomi Seligman, 310.526.0747; or Jamie Court, 310.392.0075

Santa Monica, CA — Mercury General Corp. has failed to fully disclose family ties within the company in possible violation of federal law and its own internal policies, Consumer Watchdog wrote to the Securities and Exchange Commission today.  The company did not tell investors that the chief actuary — responsible for financial projections relied on by shareholders, policyholders, regulators and the public — is the CEO’s nephew.

“This is a publicly traded company that is being run like a family business and investors aren’t being told the truth,” said Consumer Watchdog president Jamie Court.

The letter and exhibits can be read here:

http://www.scribd.com/full/31229981?access_key=key-hahoypjg3c88cpqwicb

http://www.scribd.com/full/31230057?access_key=key-1djo5lae6jxfas3ic070

The Sarbanes-Oxley corporate governance law requires that “companies disclose “relationships that may present actual or potential conflicts of interest that may affect officers’, directors’ and director nominees’ execution of their duties.”  A review of Mercury, conducted by Consumer Watchdog, raises serious questions around Mercury’s previously-undisclosed practice of employing numerous relatives of company Chairman George Joseph, sometimes in sensitive positions.

For example, Charles F. Toney II, who is Joseph’s nephew as well as the company’s chief actuary and vice president, is listed in SEC filings as an executive officer, but not a relative.

At least 9 relatives of George Joseph have worked at Mercury or its affiliated enterprises, including MetroWest Insurance Services.

Another pressing question is whether Mercury, which has a strong policy against nepotism, has ever disclosed if its policy was waived by Joseph in connection with his relatives.

Mercury Insurance has also spent $10 million on California Prop 17, to legalize currently illegal surcharges. The financial projections behind the measure, presumably overseen by the Chairman’s nephew, have been used by the company in a deceptive campaign to convince the public there will no rate hikes if Proposition 17 passes.

Charles Toney’s position presents a significant potential conflict of interest. On March 17, the respected brokerage Stifel Nicolaus issued a report questioning the Mercury’s unusually low level of loss reserves, which is based on implausibly optimistic assumptions about the insurer’s loss-ratio. Those assumptions make Mercury “an extreme outlier” in the industry, Stifel Nicolaus said.

Stifel issued a second note last month predicting that Mercury would take “an imminent reserve charge due to aggressive reserves, particularly for accident years 2008 and 2009.”

Mercury has resisted providing full disclosure to the SEC of Mercury’s connections to Metro West.  In a June 5, 2009 letter to Mercury President and Chief Executive officer Gabriel Tirador, the SEC requested additional information regarding the contract between Mercury and Metro West, but to date Mercury declined to provide a copy of this contract partly on the grounds that the company was sold in February 2008 and is no longer owned by George Joseph’s daughter Ellen Joseph.  But that reply from Mercury, dated June 19, 2009, fails to note that ownership of Metro West merely passed to another member of the Joseph family, George Toney  – who in fact is the brother of Mercury’s chief actuary Charles F. Toney II.

There are several other Joseph family connections to Metro West. Louise Toney, George Joseph’s sister and the mother of chief actuary Charles Toney, is the head agent at Metro West. In 2008, she received $150,000 in commissions from Mercury. Metro West also employs George Toney’s wife Katie, and her brother Bryan Lovell.

While corporate nepotism is not illegal, the SEC has previously found that failure to disclose employment of family members can be a violation.

“Even George Joseph the billionaire can’t buy his way out of this one. He is playing fast and loose with SEC law. We urge the Commission to promptly conduct a thorough review of Mercury’s practices and hold the Chair of Mercury accountable to his actions.”

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For more information, please visit: http://StopProp17.org or find us on twitter at: http://twitter.com/stopmercury and facebook at: http://www.facebook.com/stopprop17

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