A California judge has ruled that Tesla Inc's auto insurance arm could face a class-action lawsuit claiming the company overcharged drivers based on "false" collision warnings from their vehicles rather than actual driving behavior. On December 1, Alameda County Superior Court Judge Brad Seligman in Oakland rejected Tesla Insurance Services’ request to dismiss a consumer protection lawsuit filed under California’s unfair competition law in an order.
A spokesperson for Tesla and an attorney for its insurance subsidiary did not respond to requests for comment.
Tesla launched its insurance arm in 2019, and CEO Elon Musk has promised that its insurance unit can provide "much better" service than other auto insurance companies. Tesla Insurance, based in Fremont, California, denies misleading consumers.
In addition to rejecting Tesla's request, Seligman also agreed on December 1 to dismiss the breach of contract claim filed by the plaintiff, Illinois resident Ricky Stephens, but gave him an opportunity to modify the claim. For Tesla, the judge's decision is good news. Stephens' attorney did not respond to a request for comment.
Stephens previously filed lawsuits on behalf of Tesla owners from Arizona, Colorado, Illinois, Maryland, Minnesota, Nevada, Ohio, Oregon, Texas, Utah and Virginia.
Tesla offers insurance for four of the company's vehicles based on real-time driving behavior. The company said premiums are calculated based on a number of factors, including a "safety score," which includes an assessment of vehicle data such as hard braking, sharp swerving and forward collision warning.
Many Tesla owners said they received "sporadic and random forward collision warnings in situations where there was no danger," which affected their safety scores and led to higher insurance premiums, the lawsuit said. Stephens said the reason for the false warning was that "Tesla's sensor technology is still in the development process."
The complaint asks the court to reinstate the status quo, seize Tesla's insurance profits, and issue an injunction over alleged false advertising. An initial hearing in the case is scheduled for January next year.