Tesla Insurance Under Fire from CA Regulator Over 'Egregious Delays,' 'Systemic Failures'

The California Department of Insurance (CDI) has accused Tesla’s insurance arm, along with its partner State National Insurance Company, of engaging in “willful unfair claims settlement practices.” These include “egregious delays in responding to policyholder claims in all steps” of the process and “unreasonable denials,” actions which the CDI states have allegedly caused “financial harm” and “distress to policyholders.”

The regulator asserts that despite initial interventions in 2022, the situation has only deteriorated. Indeed, the CDI noted that, according to filings, “In 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined.”

CDI first engaged with Tesla in December 2022, following a “marked uptick in claims-related consumer complaints” against the company. During this period, the regulator discovered that Tesla’s “Head of Claims” position had been vacant for months and accused the companies of failing to report these critical claims-handling problems.

As a consequence, CDI subjected both Tesla and State National to a six-month probationary period to monitor their efforts to reduce violations. Tesla and State National “conceded” they had underestimated the volume of claims and the staffing required to handle them, promising to increase hiring.

While Tesla eventually hired a new Head of Claims in April 2023, and both companies “reported improvements in the quality” of their claims handling and the “resolution of consumer complaints” through the remainder of that year, this respite was short-lived.

By 2024, the CDI observed a “significant increase” in both consumer complaints against Tesla and “violations of the law.” The number of consumer complaints surged from a mere 83 in 2022 to 829 in 2024, with the CDI finding Tesla in violation of the state’s insurance code in 775 of those cases.

The problems have intensified further this year. Through September 22, the regulator has received 1,481 complaints against Tesla and identified 1,969 insurance code violations. Cumulatively, since 2022, Tesla has accumulated nearly 3,000 violations of state insurance law. The vast majority of these involve Tesla’s failure to respond to customers within the mandatory 15-day period, alongside 166 identified violations where Tesla failed to conduct a “thorough, fair, and objective investigation” into a claim.

“CDI repeatedly notified [Tesla] of its claims-mishandling issues and violations of law,” the regulator stated, adding, “While [Tesla] repeatedly committed to improvements, the number of justified complaints and violations continued to mount, demonstrating [Telsa’s] failure to correct its practices.” Consequently, Tesla and State National now face potential penalties of up to $5,000 for each “unlawful, unfair, or deceptive act” and up to $10,000 for each “willful” act. The companies have 15 days to respond to the allegations.