The California Department of Insurance issued enforcement actions today against Tesla Insurance Services, Inc. and Tesla Insurance Company (Tesla Companies), plus State National Insurance Company (State National), in order to protect consumers after the companies allegedly repeatedly failed in their legal obligations to adequately handle hundreds of California automobile policyholder claims. 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 allegedly 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 allegedly the number of justified consumer complaints and violations continued to mount.
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
– – 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
The companies have 15 days to respond to the Department’s Accusations and Notices.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.
In approximately the first quarter of 2022, Tesla Insurance Holdings, LLC, a wholly-owned subsidiary of Tesla, Inc., a Delaware Corporation, acquired control of Balboa Insurance Company, including its wholly-owned subsidiaries, Tesla Property & Casualty, Inc. (formerly known as Meritplan Insurance Company) and Tesla General Insurance, Inc. (formerly known as Newport Insurance Company). In approximately the first quarter of 2022, Balboa Insurance Company’s name was changed to Tesla Insurance Company, NAIC number 24813.
As of today (three days after the action was filed), there has not been any public statement, press release, or response from Tesla, Elon Musk, or the Tesla Companies addressing these specific accusations. Searches across news sources, Tesla’s investor relations page, and X (formerly Twitter) posts from official Tesla/Musk accounts yielded no results indicating a reply.