California Department of Insurance brings enforcement actions against Tesla companies to stop insurance business practices harming California drivers

The California Department of Insurance issued enforcement actions today against Tesla Insurance Services, Inc. and Tesla Insurance Company, plus State National Insurance Company, in order to protect consumers after the companies repeatedly failed in their legal obligations to adequately handle hundreds of California automobile policyholder claims.

The actions allege Tesla's repeated failures to comply with long-standing claims handling laws, including delaying claims payments and not timely responding to consumers.

Tesla Insurance Services, Inc. is an appointed agent for State National, an admitted insurer in California. 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 actions allege that, despite being repeatedly warned by the Department of Insurance, the Tesla companies and State National instead chose to abandon their responsibility to consumers and persist with their non-compliant claims-handling practices, placing profits above people and flouting the law with impunity.

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 repeatedly warned the Tesla companies and State National of the significant 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.

Instead of correcting their unlawful and egregious behavior, the companies disregarded the Department's serious warnings and continued their misconduct, and the number of consumer complaints and the amount of legal violations have only continued to significantly increase. 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.

The department's accusations are based on the companies' ongoing systemic failures and willful unfair claims settlement practices including, but not limited to, the following 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 they expect; and

Failure to advise policyholders of their rights to have their claims denials reviewed by the Department – a major consumer protection in California to make sure insurers are held accountable by their regulator.

These actions use the full authority of the California Department of Insurance to protect Californians so that they receive fair treatment of their claims and the full benefits they are timely owed. The department brings these actions on behalf of consumers, to make sure insurance companies honor their promises and maintain their claims-handling practices in accordance with California law.

Today's "Accusations" and "Notices of Orders to Show Cause" allege that the incompetency, untrustworthiness and misconduct of these companies constitute grounds for the Insurance Commissioner to suspend or revoke their licenses and that it would be against the public interest to continue to allow these companies to continue transacting insurance in the State of California.

The companies have 15 days to respond to the Department's Accusations and Notices.

This case is a strong example of how the department investigates consumer complaints, seeks corrective action, and ultimately takes legal action when companies do not act to resolve consumer claims fairly and swiftly under the law. The Department remains steadfast in its mission to protect all consumers and will use every tool available to accomplish this commitment every day.

Any current or past auto insurance policyholder of Tesla Insurance Company or State National Insurance Company who believes their consumers rights were violated by any of these companies should contact the Department of Insurance.

The department encourages all consumers who have questions about their claims to contact its Consumer Services team at (800) 927-4357 or online at insurance.ca.gov.