Insurance company on the hook for $27M after state high court appeal fails

Mercury Insurance Co. must pay $27.6 million in civil penalties for overcharging California drivers for auto insurance after the state Supreme Court declined to review the fine.

It is the largest fine against a property and casualty insurer ever imposed by the California Department of Insurance, according to a statement emailed by the department Thursday.

The high court's late Wednesday decision leaves intact a 4th District Court of Appeal ruling reinstating the 2015 fine levied by then-Insurance Commissioner Dave Jones and subsequently vacated by Orange County Superior Court Judge Gail Andrea Andler.

The unanimous May ruling, authored by Justice David A. Thompson, deemed Andler's findings a legal error because there was "substantial evidence supporting the Commissioner's decision."

The fine stemmed from an insurance department investigation revealing Mercury had been charging California drivers $50 to $150 in illegal "broker fees" on top of their state-approved premiums to sidestep insurance changes under Proposition 103. The fine is equal to the sum illegally collected between 1999 and 2004.

Proposition 103, passed by the voters in 1988, bars auto insurers from charging excessive rates and requires rates be approved by the insurance commissioner.

Mercury said in an emailed statement Thursday that in overruling the trial court, the appeals court erred.

"[T]he trial court's ruling was based upon the merits of the case. It found that Mercury didn't benefit from the fees in question because they were never collected by Mercury," the company statement said.

-- Helen Christophi