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Mercury Casualty Co. v. Jones, Commissioner of Insurance

Mercury Casualty Company, a California home and auto insurer, sought state approval for a substantial increase in its rates. The state’s insurance commissioner, applying the rate formula set forth in applicable regulations, found that a decrease in the rates was required. Even with the decrease, Mercury made a profit on the policies, and the regulatory formula allowed it a substantial rate of return on its capital. Nonetheless, Mercury challenged the rate decision in the state courts, arguing that it violated the Constitution’s due process clause because it did not allow a “fair” rate of return and was therefore “confiscatory.” The California courts, applying governing Supreme Court decisions, found that the rate allowed the company to operate successfully and did not impose financial hardship, and thus was not confiscatory. Mercury filed a petition for a writ of certiorari in the U.S. Supreme Court, seeking a ruling that the Constitution guarantees it a “fair” rate of return and does not require it to show financial hardship to challenge a rate as confiscatory. In the Supreme Court, Public Citizen was cocounsel for Consumer Watchdog, a California organization that participated in the state administrative and court proceedings to protect the interests of consumers. In our brief in opposition to the petition for certiorari, we argued that the state court’s decision is consistent with decades of Supreme Court precedent, does not conflict with lower court rulings from other jurisdictions, and should not be reviewed for a number of other reasons, including that the validity of a rate order that was only in effect for a few months in 2013 before the company received approval of a rate increase poses no live issue of importance for the Supreme Court to address. The Supreme Court denied Mercury’s petition for certiorari in February 2018.