Tesla has been hit with an enforcement motion by California’s Division of Insurance coverage (CDI) for routinely denying or delaying buyer claims regardless of years of warnings from the state regulator, based on a brand new pair of filings.
Tesla’s insurance coverage arm, together with its accomplice State Nationwide Insurance coverage Firm, engaged in “willful unfair claims settlement practices” together with “egregious delays in responding to policyholder claims in all steps” of the method and “unreasonable denials,” CDI wrote. This has allegedly prompted “monetary hurt” and “misery to policyholders.”
CDI first approached Tesla about these points in 2022, based on the filings, but it claims issues have solely gotten worse. “In 2025, the Tesla Corporations have already had extra complaints, extra justified complaints, and dedicated extra violations than within the three earlier years mixed,” the regulator wrote.
Tesla and State Nationwide might face penalties as much as $5,000 for every “illegal, unfair, or misleading act” and as much as $10,000 for every “willful” act, based on the filings. The businesses have 15 days to reply.
The enforcement motion might have knock-on authorized results for Tesla. In July, the corporate was hit with a proposed class motion lawsuit over allegations that the firm purposely delayed and minimized declare payouts. CDI wrote Friday that Tesla’s actions could have created “potential third-party legal responsibility publicity.” Tesla and State Nationwide didn’t instantly reply to a request for remark.
Tesla launched its in-house insurance coverage product in 2019. The concept was to supply cheaper premiums and sooner service. However it received off to a rocky begin. The web site repeatedly crashed, and when it didn’t, it supplied quotes that have been far increased than homeowners anticipated. Nonetheless, Musk promised it will be a “revolutionary” product.
Simply three years later, based on CDI’s filings, the regulator seen a “marked uptick in claims-related shopper complaints” in opposition to Tesla. So in December 2022, CDI began assembly with Tesla and State Nationwide.
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The regulator mentioned it discovered Tesla’s “Head of Claims” place had been vacant for months. It additionally accused the businesses of not reporting the claims-handling issues.
In consequence, CDI subjected Tesla and State Nationwide to a kind of probationary interval: the regulator monitored the businesses’ efforts to cut back these violations for six months. Tesla and State Nationwide “conceded” that they’d underestimated the amount of claims and the staffing required to deal with them, based on CDI, and promised to beef up hiring.
It took Tesla till April 2023 to rent a brand new Head of Claims. By the remainder of that yr, Tesla and State Nationwide “reported enhancements within the high quality” of their claims dealing with and the “decision of shopper complaints.”
Later that yr, Reuters revealed an investigation into Tesla’s insurance coverage arm that confirmed issues weren’t so rosy.
CDI got here to the identical realization in 2024. The regulator seen a “vital improve” in each shopper complaints in opposition to Tesla and “violations of the regulation,” based on the filings. CDI had obtained simply 83 shopper complaints in opposition to Tesla in 2022, however in 2024, that quantity jumped to 829. In 775 of these instances, CDI discovered Tesla had violated the state’s insurance coverage code.
Issues have solely gotten worse, based on CDI. By September 22 of this yr, the regulator has obtained 1,481 complaints in opposition to Tesla, and recognized 1,969 insurance coverage code violations.
In whole, since 2022, CDI mentioned Tesla has accrued almost 3,000 violations of state insurance coverage regulation. Nearly all of these violations contain Tesla failing to answer prospects throughout the obligatory 15-day interval. CDI mentioned it recognized 166 violations through which Tesla filed to conduct a “thorough, honest, and goal investigation” right into a declare.
“CDI repeatedly notified [Tesla] of its claims-mishandling points and violations of regulation,” the regulator wrote. “Whereas [Tesla] repeatedly dedicated to enhancements, the variety of justified complaints and violations continued to mount, demonstrating [Telsa’s] failure to appropriate its practices.”