CDI alleges Tesla’s repeated failures to comply with long-standing claims handling laws, including delaying claims payments and not timely responding to consumers
Oakland, Calif.—The California Department of Insurance (CDI) issued enforcement actions this month against Tesla Insurance Services, Inc. and Tesla Insurance Company, as well as State National Insurance Company. Tesla Insurance Services, Inc. is an appointed agent for State National.
The Department of Insurance alleges the companies repeatedly failed in their legal obligations to adequately handle hundreds of California automobile policyholder claims. Unless those issues are resolved in favor of policyholders beforehand, the companies will be ordered to a hearing to determine whether they will be able to maintain their ability to transact insurance business in California as well as face significant monetary penalties.
The actions allege that, despite being repeatedly warned by the Department of Insurance, the Tesla companies and State National instead persisted with their non-compliant claims-handling practices.
The companies face monetary penalties up to $5,000 for each unlawful, unfair, or deceptive act, or up to $10,000 for each such act determined to be willful.
After continuing to receive a significant number of consumer complaints related to the handling of their automobile policyholder claims beginning in 2022, the Department of Insurance stated it repeatedly warned the Tesla companies and State National of the harm to their policyholders — largely Tesla drivers — unless immediate corrective actions were taken.
Throughout numerous meetings with, correspondence between, and reports to the Department of Insurance, the companies repeatedly committed to improvements, but the number of justified consumer complaints and violations continued to mount.
Alleged violations
• Egregious delays in responding to policyholder claims in all steps of the claims handling process, causing financial harm, out-of-pocket expenses, potential third-party liability exposure, and distress to policyholders.
• Unreasonable denials and delays in fully paying valid claims to consumers.
• Failure to conduct thorough, fair, and objective investigations of claims, thus denying consumers the insurance benefits.
• Failure to advise policyholders of their rights to have their claims denials reviewed by the department.
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