California Insurance Commissioner Dave Jones and the state's insurance companies are headed for a legal showdown over whether his power to regulate premiums includes a responsibility to provide insurers with a fair profit.
A suit filed against Jones by Mercury General Corp., one of the state's most aggressive issuers of auto and other personal insurance, is the latest skirmish in the 25-year-long legal and political maneuvering over the impact of Proposition 103, the 1988 ballot measure giving the insurance commissioner more rate-setting authority and making it an elective position.
On Tuesday, five national and state insurance trade organizations asked permission to intervene in the Sacramento Superior Court case, saying its outcome could affect the premiums paid by millions of Californians.
Mercury has periodically tested the limits of Proposition 103 - even sponsoring two unsuccessful ballot measures to alter its provisions - and has become a political target of Proposition 103's sponsors, a group called Consumer Watchdog, which is also closely allied with Jones and has received millions of dollars in "intervenor fees" from the Department of Insurance.
Consumer Watchdog, based in Santa Monica, is supporting Jones' bid to regulate health insurance premiums, which may become another ballot measure.
The Mercury lawsuit stems from a rate increase request Mercury filed in 2009. Instead, an administrative law judge ordered a rate decrease and Jones upheld the ruling. Mercury claims that the decision improperly relied on outdated data.
The issue is whether Jones must allow Mercury and other insurers a fair rate of return on premium income, which is not specifically spelled out in Proposition 103. However, in regulating utility rates, the state Public Utilities Commission has the dual role of protecting consumers and providing fair rates of return to the utilities.
PHOTO CREDIT: A worker buffs a car at a vehicle repair center in Fresno. Randy Pench / Sacramento Bee file, 2002