Tesla Insurance, State National could lose California licenses over hundreds of consumer complaints

The California Department of Insurance (CDI) has issued enforcement actions against Tesla Insurance Services, Inc., Tesla Insurance Co., and State National Insurance Co. for repeatedly failing to adequately meet their legal obligations to handle hundreds of automobile policyholder claims, according to a press release.

CDI says that this year, the Tesla companies have already had more justified complaints and committed more violations than in the three previous years combined. Tesla Insurance Services, Inc. is an appointed agent for State National, an 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 CDI said in the release.

“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.”

CDI says it began receiving consumer complaints about the claims handling practices of the companies in 2022. After continuing to receive a significant amount of complaints, CDI said it 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,” the release says. “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.”

Andrew Batenhorst, body shop manager of Pacific BMW Collision Center in California and president of the California Auto Body Association Glendale/Foothill Chapter, told Repairer Driven News his shop and several others nationwide have long had issues with Tesla Insurance.

“Tesla’s No. 1 issues are not being able to reach anyone on the phone or through email,” he said. “Calling in to their claims line results in 20-30 minute hold times only to have the call disconnected or forwarded to voicemail. Following this, Tesla employs a variety of different third-party appraisal companies to handle adjusting claims; this results in inconsistent approvals.

“Then, Tesla will aggressively audit what the third-party appraiser wrote, and dramatically reduce what was originally agreed upon with the adjuster. This causes further delays and, in many cases, an out-of-pocket expense for the customer. They also routinely fail to provide DOI-required denials/addenda and communication to the insured/claimant.”

CDI says its accusations are based on the ongoing systemic failures and willful unfair claims settlement practices of the companies 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 release says. “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.”

CDI added that the companies’ misconduct is incompetent and untrustworthy, constituting grounds for the insurance commissioner to suspend or revoke their licenses, as it would be against the public interest to allow them to continue transacting insurance in California.

The department gave the companies 15 days from Oct. 3 to respond to its 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 release says. “The department remains steadfast in its mission to protect all consumers and will use every tool available to accomplish this commitment every day.”

CDI encourages any current or past Tesla Insurance Co. or State National Insurance Co. auto insurance policyholder who believes their consumer rights were violated to contact the department. CDI’s Consumer Services team can be reached at 800-927-4357 or online at insurance.ca.gov.

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Featured image provided by Tesla