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Sep 25, 2003
by R.J. Lehmann, associate editor
CONSUMER GROUP SUGGESTS MERCURY GENERAL PAID FOR DAVIS' SIGNATURELOS ANGELES (BestWire) - A consumer group is calling for a public investigation into whether political contributions made to California Gov. Gray Davis by Mercury General Corp. unduly influenced the governor to sign a bill allowing insurers to offer discounts to automobile insurance policyholders based on the length of time they hold continuous coverage.
The group, the Santa Monica-based Foundation for Taxpayer and Consumer Rights, claims that Davis, who had vetoed a version of the bill last October but signed a newer version in August, was engaging in "quid pro quo policymaking." FTCR opposed the bill, SB 841, on the grounds that it violates California's 15-year-old Proposition 103, which sets the specific factors that insurers may use in determining rates and eligibility for auto insurance.
According to Douglas Heller, FTCR's senior consumer advocate, the foundation is asking U.S. Attorney McGregor Scott to investigate $175,000 in contributions made by Mercury (NYSE:MCY) to a campaign opposing the effort to recall Davis in an election scheduled for Oct. 7. If promised to Davis in advance of, and in exchange for, his signing the bill, Heller said, the contribution could amount to felony violations of campaign finance laws.
Mercury General's chief executive officer, George Joseph, confirmed the company had contributed to Davis' campaign and said it had made at least eight contributions to Davis of $5,000 or more dating back to 1999. Among the contributions the company has made, Joseph said, was a $20,000 contribution that Davis accepted just before vetoing the previous version of S.B. 841.
"Actually, the $175,000 they're talking about is wrong, because I think it was closer to $200,000," Joseph said. "Look, I don't agree with everything Gray Davis has done since he's been governor, but I think this has been the wrong way to go about it. We're against the recall. It's that simple."
Joseph said the bill, which Mercury General sponsored, was opposed by FTCR solely because Prop 103 had been sponsored by the group's founder, Harvey Rosenfield. "This is Harvey's baby, and he doesn't want anyone touching it, even though the law clearly states that we are allowed to create these criteria for rating," Joseph said.
Davis' spokesman Steve Maviglio called FTCR's accusation a "ridiculous, irrational charge," adding that "the material they provided shows that there were significant changes to the bill. They lost. The bill passed with, I believe, all but one vote."
Heller said Maviglio's assertion wasn't supported by the record. "The only substantial change that was made was an exemption they gave for soldiers serving abroad, and other than that, it was the same bill," Heller said.
The bill would allow companies to offer discounts to policyholders based on the length of time that they have continuously held coverage, either with the issuing insurer or with any of its competitors. Added to the bill since Davis last vetoed it were amendments that allow policyholders' coverage to be considered "continuous" if they never spent more than a 90-day period without insurance. Members of the military are granted a maximum exemption of two years.
According to the bill's text, "absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums, or insurability." However, the bill provides that an insurer "may use
persistency of automobile insurance coverage with the insurer, an affiliate, or another insurer as an optional rating factor."
Although the foundation didn't yet expect to hear back from the U.S. Attorney's Office, Heller said the FTCR said specifically wants Scott to look into a memo from Mercury's chief lobbyist, which they said suggests Davis might have met with Mercury's representatives before signing the bill. In the memo, which was circulated to Assembly members, Mercury claims that the reasons that Gov. Davis vetoed the bill last year "no longer exist."
Most subsidiaries of Mercury General have financial strength ratings of A+ (Excellent) from A.M. Best Co.
Mercury General's stock was trading at $43.71 a share on the afternoon of Sept. 25, down 0.95% from the previous close.
According to A.M. Best Co.'s state/line data, California's top five writers of private-passenger auto policies in 2002 were State Farm, with a 13.8% market share based on direct premiums written; Zurich/Farmers, with 11.4%; California State Auto Group, with 9.2%; Allstate Insurance, with 9.1%; and Automobile Club of Southern California, with 8.8%.
R.J. Lehmann, associate editor: firstname.lastname@example.org
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