California’s Department of Insurance has taken enforcement action against Tesla for routinely denying or delaying customer claims. This action comes after years of warnings from the state regulator. Tesla’s insurance arm, along with its partner State National Insurance Company, engaged in what the department calls willful unfair claims settlement practices. These practices included egregious delays in responding to policyholder claims at every step of the process and unreasonable denials. The regulator states this has caused financial harm and distress to policyholders.
The Department of Insurance first approached Tesla about these issues in 2022. The regulator claims the situation has only deteriorated since then. It reported that in 2025 alone, the Tesla companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined. Tesla and State National could now face penalties of up to five thousand dollars for each unlawful, unfair, or deceptive act and up to ten thousand dollars for each willful act. The companies have fifteen days to respond to the enforcement action.
This development could have further legal consequences for Tesla. In July, the company was hit with a proposed class action lawsuit over allegations that it purposely delayed and minimized claim payouts. The Department of Insurance also noted that Tesla’s actions may have created potential third-party liability exposure.
Tesla launched its in-house insurance product in 2019 with the idea of offering cheaper premiums and faster service. However, it got off to a rocky start with website crashes and quotes that were far higher than owners expected. Despite this, company CEO Elon Musk promised it would be a revolutionary product.
Just three years later, the regulator noticed a marked uptick in claims-related consumer complaints against Tesla. This led to meetings starting in December 2022. During these meetings, the regulator learned that Tesla’s Head of Claims position had been vacant for months. It also accused the companies of not reporting the claims-handling problems. As a result, the Department of Insurance placed Tesla and State National under a probationary period, monitoring their efforts to reduce violations for six months. The companies conceded they had underestimated the volume of claims and the staffing required, promising to increase hiring.
Tesla did not hire a new Head of Claims until April 2023. For the rest of that year, the companies reported improvements in their claims handling and the resolution of consumer complaints. However, an investigation published later that year suggested things were not as positive as reported. The Department of Insurance came to the same realization in 2024, observing a significant increase in both consumer complaints and violations of the law.
The number of complaints received by the regulator jumped from just 83 in 2022 to 829 in 2024. In 775 of those 2024 cases, the department found Tesla had violated the state’s insurance code. The situation has continued to worsen. Through September 22 of this year, the regulator has received 1,481 complaints against Tesla and identified 1,969 insurance code violations.
In total, since 2022, Tesla has accumulated nearly 3,000 violations of state insurance law. The majority of these violations involve Tesla failing to respond to customers within the mandatory 15-day period. The department also identified 166 violations in which Tesla failed to conduct a thorough, fair, and objective investigation into a claim. The regulator stated that it repeatedly notified Tesla of its claims-mishandling issues and violations of law. While Tesla repeatedly committed to improvements, the number of justified complaints and violations continued to mount, demonstrating the company’s failure to correct its practices.