In a recent ruling, a California judge has given the green light to a potential class action lawsuit against Tesla’s car insurance unit. The lawsuit alleges that Tesla Insurance Services overcharged policyholders by relying on questionable crash warnings rather than actual driving behavior to determine premiums.
The decision by Oakland-based Judge Brad Seligman of Alameda County Superior Court on Friday denied Tesla Insurance Services Inc’s attempt to dismiss the case, which was filed under California’s comprehensive unfair competition law.
Tesla, led by CEO Elon Musk, had launched its insurance unit in 2019, pledging to deliver a service far superior to traditional auto insurers. However, a recent Reuters special report highlighted numerous complaints, prompting state regulators and plaintiff attorneys to scrutinize Tesla Insurance.
Despite Tesla Insurance’s denial of misleading practices, Judge Seligman granted a partial win to the company by dismissing a breach of contract claim from plaintiff Ricky Stephens, an Illinois resident. However, Stephens has been given the opportunity to amend the claim.
Stephens initiated the lawsuit on behalf of Tesla drivers in several states, including Arizona, Colorado, Illinois, and Texas. The insurance offered by Tesla supposedly relies on real-time driving behavior for four models of the company’s cars, with premiums determined by factors like a “safety score.”
The complaint alleges that numerous Tesla drivers experienced unwarranted Forward Collision Warnings, impacting their safety scores and leading to increased premiums. Stephens attributes these erroneous warnings to Tesla vehicles’ ongoing sensor technology development.
The lawsuit seeks restitution, disgorgement of profits, and an injunction against alleged false advertising. Stephens’ lawyer emphasized that an injunction would compel Tesla to ensure accurate advertising and prevent the inclusion of non-occurring driving events in premium calculations.
A hearing for the case is scheduled for January, marking a crucial moment for Tesla as it navigates legal challenges related to its insurance practices.
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