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Illegal extended vehicle warranties draw further scrutiny

More than 1,000 Californians allegedly victimized, totaling over $2 million in alleged illegal vehicle service contracts

Los Angeles—Earlier this year, the California Department of Insurance issued an initial cease and desist order after learning Delta Auto Protect and its controlling manager, Charles Seruya, had allegedly victimized over 20 California consumers for allegedly selling illegal vehicle service contracts (VSCs).

However, as a result of discovery and additional consumer complaints received since then, the department learned the number of victims is now more than 1,000 throughout the state. Seruya is alleged to have sold more that $2 million in VSCs.

The department issued a news release on Monday that it had an amended cease and desist order and order to show cause, effective immediately. The company faces a potential $5,000-per-day monetary penalty for transacting insurance business without a license.

The Orders allege both Delta Auto Protect and Seruya were not licensed by the California Department of Insurance and improperly denied claims, illegally sold contracts online that they did not first file with the department directly to consumers, and used an unapproved backup insurer.

Generally, VSCs, often called “extended warranties,” are offered to consumers by car dealers when they buy a car. Most VSCs typically provide coverage for repairs due to mechanical failure. Others offer coverage for routine services, such as oil changes and tire rotation, or other services such as paintless dent removal, glass or key replacement, or tire and wheel repair.    

VSCs may be sold legally to Californians only when specific criteria are met, which Delta and Seruya failed to do, namely:

  1. Every VSC must be filed with the Department before it can be sold.
  2. Companies responsible for paying the claims on VSCs must be licensed by the Department, unless the company is a vehicle manufacturer, distributor, or dealer.
  3. These companies must carry Department-preapproved backup insurance insuring every VSC that they sell, unless they receive an exemption from the Department by proving their company has a net worth of at least $100 million.
  4. VSCs can only be sold through dealerships licensed by the California Department of Motor Vehicles. Direct sales to a consumer is illegal.

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