California’s insurance commissioner has filed enforcement actions against Tesla’s auto insurance companies for allegedly mishandling hundreds of policy claims, the department announced on Oct. 3.
Insurance Commissioner Ricardo Lara filed the enforcement actions against Tesla Insurance Services and Tesla Insurance Co., claiming they repeatedly failed to comply with the state’s claims-handling laws.
Lara alleged the companies failed “hundreds of California policy holders” by delaying claim payments, failing to respond to customers, and using unfair practices that left Tesla drivers and other policyholders waiting for benefits.
“Unless these issues are resolved in favor of policyholders beforehand, the companies will be ordered to a hearing before an administrative law judge 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 insurance department stated in an Oct. 3 statement.
State National Insurance Company, which is not affiliated with Tesla, also faces potential action.
The DMV in that action is seeking to revoke Tesla’s dealer license to manufacture or sell automobiles in the state over the claims. The case is still under litigation.
In the latest action, the state claims that Tesla’s insurance companies and State National were warned repeatedly of violations but chose to abandon their responsibility to consumers, according to the insurance department.
In total, since 2022, the department claims it has received nearly 3,000 complaints of violations of state insurance law, with a majority of those claiming the Tesla insurance companies failed to respond to customers within the state’s mandatory 15-day period.
The companies have met with the state insurance department numerous times, exchanged correspondence, and “repeatedly committed to improvements, but the number of justified consumer complaints and violations continue to mount,” the department stated.
The companies have 15 days to respond to the state’s charges. If the issues are not resolved, the companies will be ordered to a hearing before an administrative law judge to determine if they will be able to continue offering insurance policies in California. Administrative hearings permit a judge to decide the case without a jury.
The companies also face penalties of up to $5,000 for each unlawful, unfair, or deceptive act, or up to $10,000 for each act determined to be willful.
Lara and Musk have clashed before over the state’s insurance regulations. In 2022, the two traded jabs on X when Lara stated he would not consider Musk’s attempt to seek cheaper customer insurance rates by changing the state’s rules on telematics.
California law bans the use of telematics data—including driving behaviors such as speed or braking—in setting auto insurance premiums.
The company’s insurance services are currently available in Arizona, California, Colorado, Illinois, Maryland, Minnesota, Nevada, Ohio, Oregon, Texas, Utah, and Virginia.
The company claims it offers insurance products based on how and how much customers drive. Customers can get a quote, purchase and manage a policy, and submit a claim through the company’s app.
In February, the company switched to self-underwriting in California. The move was designed to gain more control over the insurance process and offer potential discounts to customers who switched to the new policies.
Tesla and State National did not return requests for comment about the enforcement actions.
