Mercury General Corp.’s insurance unit has filed a lawsuit against state Insurance Commissioner Dave Jones, challenging his order of an 8 percent rate decrease for the company’s 270,000 homeowner policyholders in the state.

Mercury Casualty Co., the property/casualty unit of the Los Angeles insurance giant, had proposed a 7.3 percent rate increase on its homeowner policies, citing data indicating rising loss costs.

Consumer Watchdog, a consumer advocacy group, challenged Mercury’s proposed rate increase in a public hearing last year, saying it was not justified. An administrative law judge with the Department of Insurance reviewed actuarial data and recommended Mercury reduce its rates.

On Tuesday, Jones announced that last month, he had issued a decision ordering an 8.2 percent rate reduction for Mercury, effective this June. In a statement issued Tuesday, Jones said the reduction would save homeowners about $16.5 million off of current rates.

Mercury filed a lawsuit in state Superior Court in Sacramento challenging Jones’ decision to order the rate reduction. In the lawsuit, Mercury argues that its homeowner policy rates are among the lowest in the state and that Jones used outdated data in issuing his order. The lawsuit also alleges that the order deprives Mercury of the right to earn a fair rate of return.

In his statement, Jones said he was going ahead with his order despite Mercury’s lawsuit and that his department would “vigorously defend against Mercury’s effort to deprive homeowners of this rate decrease.”

In a statement to the Business Journal Tuesday afternoon, Mercury said:

“Mercury’s insurance rates are among the most competitive in California, as exemplified by our 97 percent renewal rate on homeowner’s policies. We are therefore disappointed in the commissioner’s ruling… Mercury looks forward to correcting the commissioner’s position.”