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City News Service
Oct 16, 2003
by State & Local Wires
Car Insurance SuitLOS ANGELES -- Calling it discriminatory, a consumer rights group asked a court to stop implementation of a bill that allows discounts to drivers who have maintained insurance coverage.
Senate Bill 841, written at the behest of Mercury Insurance Co., also authorizes insurance companies to impose a surcharge on motorists applying for coverage for the first time, according to the Foundation for Taxpayer and Consumer Rights.
It claims Gov. Gray Davis signed SB 841 into law as a payoff for Mercury's campaign contributions.
The FTCR also claims SB 841 should be invalidated because it "unlawfully amends" Proposition 103, a package of insurance reforms voters passed in 1988.
The group claims Proposition 103 "specifically forbids" insurance surcharges, and said state Insurance Commissioner John Garamendi called the aim of SB 841 a violation.
Doug Heller of the FTCR calls SB 841 "unfair and discriminatory."
"It continues a legacy of discrimination (especially) in poor communities, where (some) people can't afford insurance," he said.
He also called the bill "dangerous for everybody because fewer people will get insurance."
According to the FTCR's complaint, which was filed in Los Angeles Superior Court on Friday, Mercury contributed $175,000 to Davis' anti-recall campaign after Davis signed SB 841 in August.
Mercury CEO George Joseph was unavailable for comment today, but disputed the FTCR's allegations in a recent interview with Insurance Journal.
Joseph said the allegations are based on the longstanding dispute over the use of "persistency," which when used as a rating criterion for auto insurance premiums, rewards customers who maintain policies as the law requires.
Joseph said SB 841, in fact, adds "portability" for motorists, allowing them to get a discount from any insurer, regardless of whom they had coverage with previously.
Heller said a hearing on the FTCR's request for an injunction is scheduled for Nov. 25 in Los Angeles Superior Court.
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