Tesla Insurance Services Inc. will have to face a prospective class action lawsuit that alleges it overcharged drivers for their insurance premiums based on “false” crash warnings rather than actual driving behavior, as ruled by Judge Brad Seligman of Alameda County Superior Court in California.
The consumer protection lawsuit, filed under California’s unfair competition law, was brought against Tesla’s (NASDAQ: TSLA) insurance unit, which was launched in 2019 with the promise of providing superior service compared to other auto insurers, according to a Reuters special report last month.
While Tesla Insurance has denied misleading consumers, the judge allowed a breach of contract claim by plaintiff Ricky Stephens, an Illinois resident, to be dismissed. However, Stephens has been given the opportunity to amend this claim.
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Stephens filed the lawsuit on behalf of Tesla drivers in several states, including Arizona, Colorado, Illinois, Maryland, Minnesota, Nevada, Ohio, Oregon, Texas, Utah, and Virginia.
Tesla’s insurance premiums are said to be determined by a “safety score,” which considers vehicle data, including hard-braking, “aggressive” turning, and “forward collision warning alerts.” However, the lawsuit alleges that many Tesla drivers have experienced false Forward Collision Warnings, leading to lower safety scores and higher premiums.
Stephens’ complaint seeks restitution, disgorgement of profits, and an injunction against alleged false advertising by Tesla. His lawyer stated that an injunction would require Tesla to ensure the accuracy of its advertising and prevent it from factoring in driving events that never occurred.
An initial hearing is scheduled for January. Tesla and its insurance subsidiary have not yet provided a response or comment regarding the ruling.
Information for this story was found via Reuters, Electrek, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
