The California Department of Insurance announced enforcement actions Oct. 3 against Tesla Insurance Services, Inc., Tesla Insurance Company and State National Insurance Company, citing systemic failures in claims handling that allegedly harmed hundreds of California policyholders.
The regulator is now threatening license suspension or revocation and steep penalties unless the companies respond within 15 days.
The actions accuse the insurers of egregious delays, unreasonable denials, insufficient investigations and failure to inform customers of their rights to regulatory review. Unless resolved in favor of policyholders, the case will proceed to a formal administrative hearing.
The companies face 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.
A loss of license or major fines could destabilize Tesla’s insurance model in its largest U.S. market.
Sharp Uptick in Complaints and Violations
The regulator’s filings indicate that complaints began rising in 2022, when 97 grievances were lodged against State National and 40 violations were identified. By 2024, complaints escalated sharply — State National alone faced 1,095 complaints and 835 code violations. That same year, Tesla’s own insurance replacement arm saw 842 complaints.
In total, regulators allege that Tesla’s insurance operations have amassed nearly 3,000 violations of California insurance law.
The alleged violations include:
• 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 of Insurance — a major consumer protection in California to make sure insurers are held accountable by their regulator
Tesla’s regulatory trouble arrives amid mounting litigation in California. In July 2025, Reuters reported a class action lawsuit was filed accusing Tesla Insurance of systematically delaying and minimizing payouts, alleging inadequate claims procedures and violations of state unfair competition law.
The California action also echoes critiques in other states. In 2023, Ohio’s Department of Insurance flagged Tesla’s claims practices for noncompliance with state rules.
As TechCrunch reported, Tesla didn’t even hire a Head of Claims until April 2023. After that, it claimed improvements, but regulatory filings suggest the changes weren’t sufficient.
