Insurance Lawyer Blog

It is not possible to turn on the TV these days without hearing endless news of the 2012 election. The presidential race has consumed most media focus, but here in California, there are other important issues that will be on the ballot in November. Among them is the 2012 Automobile Insurance Discount Act, proposed by the American Agents Alliance and supported by the billionaire chairman of Mercury Insurance George Joseph, to the tune of $8 million.

As a California insurance attorney, I see some potential issues with this Act. The changes in the so-called “persistency discount” might be helpful to some consumers. Right now, a driver generally gets a discount for having and keeping auto insurance, but if a driver switches insurance companies, that discount for maintaining insurance is lost. This Act would allow the driver to keep the discount for maintaining insurance even if he or she switches insurance companies, which supporters of this Act say is a good thing for responsible drivers.

However, the darker side to this Act is that it would also allow insurance companies to raise rates for a driver who has not kept continuous coverage. That is common in other states, but has been illegal in California since 1988. Critics say this proposal will hurt consumers who don’t own a car or use public transportation, despite being good drivers. Critics, particularly Consumer Watchdog, point to similarities in a failed ballot initiative from the 2010 election, Proposition 17. That proposed act was directly supported by Mercury Insurance and failed narrowly, 52% - 48%. One major stumbling block to Proposition 17 was that it made no provision for military personnel who are often deployed for a year or more. This 2012 Act remedies that with special provisions for the military.

The defeat of the similar proposition in 2010 was so narrow that those of us deeply involved in California’s insurance industry will be interested to see how the argument over the 2012 Automobile Insurance Discount Act will ultimately shake out. It promises to be another bitter battle in what is already shaping up to be a contentious election cycle all around. Already in December, the Insurance Journal reported that Consumer Watchdog accused Mercury Insurance of raising rates to pass on the cost of political campaigning on this issue to the consumer. At the end of last year, Mercury requested permission from the California Department of Insurance for a six percent rate hike for automobile insurance. Mercury denies this has anything to do with political campaigning. But millions were spent to support the failed 2010 Proposition 17. The company claims those costs are born by the shareholders, not consumers, and the rate increases are to cover rising costs. Under California law, insurance companies must deduct the cost of political campaign and lobbying expenses from the administrative costs they pass on to consumers. Mr. Joseph stated that a separate holding corporation, Mercury General, paid for the Proposition 17 campaign and the insurance company itself contributed no money. But that holding company should still have reported the expense, which as of December it had not done, as required by California law.

It is not surprising that the auto insurance industry might have skirted rules in order to pad its bottom line. If you are ever feel like you have been taken advantaged of by a local insurance company, please get in touch with our San Francisco insurance lawyer to see how we can help.

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Recently California’s 6th Court of Appeals ruled that when a car is sold, the previous insurance is released from liability even if all of the DMV documents have not been transferred yet. Our San Francisco insurance attorneys think auto insurance consumers should be aware of this important recent ruling when buying a new car and deciding what to do about insuring a new car- the timing could be critical.

This recent case, Thiel v. Mercury General Corporation. (http://www.leagle.com/xmlResult.aspx?xmldoc=In%20CACO%2020111227042.xml&docbase=CSLWAR3-2007-CURR), turns on the specific timing and facts as to when ownership of the car was transferred and therefore when the insurance policy ceased to cover the car. Daniel Thiel bought a 2001 BMW from the Benfords in 2008. He paid for the car both with cash and a check. He was told when his check cleared the Benfords would send him the car title. However, before any paperwork could be finalized, an uninsured drunk driver struck Mr. Thiel as he was driving his new car home the very day he bought it. Mr. Thiel was not at fault for the accident and suffered head, chest and leg injuries, requiring two surgeries on his leg and physical therapy.

Mr. Thiel was also uninsured at the time, perhaps simply because had not made insurance arrangements for the car he bought just that day. Regardless, he filed a claim with Mercury Insurance, which had insured the car under the Benfords, but his claim was rejected because the Benfords filed an online Notice of Transfer and Release of Liability with the local DMV the day after the accident and therefore the coverage was terminated.

Mr. Thiel filed a lawsuit against Mercury and claimed, among other things, insurance bad faith. He cited a California statute stating that in order to be a “bona fide sale” and avoid liability when a car is delivered to the buyer, the seller must also either endorse and give the certificate of ownership or deliver the transfer and release of liability documentation to the DMV. Mr. Thiel said he had not received title and the paperwork had not been filed with the DMV at the time of the accident. The appellate court held that a bona fide sale occurred through the nature of the agreement between the buyer and seller which is not disturbed by mere paperwork delays. The court stated that by filing the online Notice within five days of the sale, the Benfords were released of all liability after the sale date, making the fact that the accident took place prior to the filing of the Notice irrelevant.

While this case has a specific fact pattern that lead to Mr. Thiel’s unfortunate dilemma, there are lessons for California auto insurance consumers. San Francisco Insurance lawyers know that auto insurance, like all insurance, can be tricky for consumers to understand. There are seemingly an endless array of clauses and particularities of when something is covered and when it is not. Perhaps when you buy a new car, you do not think of getting insurance ahead of time. Or maybe you are unaware of what happens to your previous insurance when you buy or sell a car. As always, the important thing is to know about your policy and understand the basics of the insurance laws before a problem arises. Anytime you have concerns about insurance issues, be sure to contact a San Francisco insurance lawyer to get experienced help.

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