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Mercury Insurance Co. is ending its two-decade battle with California regulators over extra fees charged to customers by agreeing to pay the state more than $41 million, officials said Wednesday. California Insurance Commissioner Ricardo Lara said it’s the largest property and casualty penalty and interest payment in the history of the state Insurance Department.

The settlement came after the state Supreme Court last month declined to hear the company’s appeal from a lower court decision.

The company said it is the fourth largest private passenger automobile insurer in California, with assets over $4 billion. It also provides automobile insurance in Arizona, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas and Virginia.

A state appeals court in May reinstated a $27.6 million fine issued to Mercury by the Department of Insurance in 2015 for allegedly charging its customers illegal fees.

The department said Mercury allowed auto insurance agents to charge up to $150 in unapproved fees on top of state-approved premiums. That cost consumers more than $27 million in fees on more than 180,000 transactions from 1999 to 2004, the department said, though Mercury argued that the costs were legal broker fees.

A judge in Southern California’s Orange County overturned the fine in 2016, but the state’s Fourth District Court of Appeal ruled that Mercury agents were not brokers and as a result could not charge the fees.

The company defended its actions Wednesday, calling the appeals court decision “an unprecedented and poorly-reasoned opinion.” It also said in a statement that the fees at the heart of the dispute were collected by independent agents, not Mercury, and had been disclosed to customers.

Mercury added that it “decided to put an end to this 20-year-old plus dispute in the best interests of its customers, employees and other stakeholders.”

Lara said the company advertised that its rates were lower than competing insurance companies, though they were actually higher because of the alleged illegal fees. That gave agents an incentive to place policies with Mercury, even if a competitor’s policy would have been cheaper for consumers.

“Mercury’s illegal actions misled consumers and undercut competitors, which gave them an unfair advantage in the insurance marketplace,” Lara said in a statement.

The $41.2 million settlement includes $8.1 million in interest plus an additional $5.5 million payment to settle an allegation of false advertising that had not yet gone to trial, Lara said.

“This was a hard fought legal battle to protect consumers … and make sure all insurers play by the rules in California. No insurance company is above the law,” Lara said.

Mercury said the actual fine assessed to close the case is $500,000 because it already paid the original fine of $27.6 million and the rest was for interest and costs associated with the case.

Most of the money will go to California’s general fund. Nearly $5 million will go to reimburse a special insurance fund used to enforce state insurance laws, meaning Mercury paid the state’s legal and court costs, Lara said.

Correction: An earlier headline mischaracterized Mercury Insurance’s involvement in the legal dispute. It has been updated.

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