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Lawsuit alleging ‘unfair’ & ‘deceptive’ Tesla UBI premium calculations moves forward

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Insurance | Legal
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Tesla Insurance Services, the automaker’s usage-based insurance company, faces a class-action lawsuit for allegedly calculating premiums based on false “sporadic and random Forward Collision Warning alerts” and other Tesla drivers’ driving habits rather than real-time individual driver actions.

Illinois resident Ricky Stephens filed suit in April on behalf of a putative class of individuals living in the 11 states where the UBI insurance is offered — Arizona, Colorado, Illinois, Maryland, Minnesota, Nevada, Ohio, Oregon, Texas, Utah, and Virginia — who purchased usage-based insurance from Tesla.

On Dec. 1, Tesla’s motion to dismiss was denied in California’s Superior Court of Alameda County.

Tesla Insurance reportedly calculates month-to-month premiums based on driving habits from the previous month using five safety factors — FCW, hard braking, aggressive turning, unsafe following, and forced Autopilot disengagement, according to the complaint and advertisements from the automaker.

The false FCWs result in immediate downgrades of the insured’s Safety Score and result in a higher premium, according to the complaint.

The suit alleges violation of California’s Business and Professions Code § 17200 (the Unfair Competition Law) and Illinois’ Consumer Fraud and Deceptive Business Practices Act as well as breach of contract and unjust enrichment.

The suit states that Tesla advertises its UBI as “Insurance You Control” because it “base[s] your premium on how you drive” and “reward[s] safe driving,” based on “real-time driving data… to calculate your Safety Score.”

“The way that Defendant’s usage-based insurance works is that when a new Tesla driver signs up for Defendant’s insurance, he or she is assigned an initial ‘Safety Score’ of 90, within a range of 0-100,” the suit states. “For the first two months, the driver pays the intitial premium based on the initial Safety Scorer of 90. After the first month of driving, a new premium is calcualted for the third month based on the driver’s driving habits. From there on, each consecutive month Defendant generates a new premium based on the driver’s driving habits from the previous month.”

In addition to numerous Tesla drivers allegedly reporting “ghost” FCWs, “other Tesla drivers have also observed Forward Collision Warnings reflected in their Safety Score without ever experiencing any warning while driving their vehicle,” according to the complaint.

Through these alleged actions, the plaintiffs claim Tesla is acting unfairly and breaching the implied covenant of good faith and fair dealing by deceitfully “charging consumers for inflated insurance premiums.”

A Reuters report published last month shared how numerous complaints about Tesla Insurance had drawn scrutiny from state regulators and plaintiffs’ lawyers.

Fremont, California-based Tesla Insurance has denied misleading consumers. Judge Brad Seligman dismissed the breach of contract claim but is allowing Stephens to amend it.

The plaintiff seeks restitution, disgorgement of profits, and an injunction against alleged false advertising.

The UBI program could also affect the collision repair process.

A Repairer Driven News reader provided an example in September of how performing a necessary set of driving conditions on a customer’s Tesla negatively affected their auto insurance Safety Score.

As vehicles and consumers become more technologically connected to their vehicles, repair facilities working on connected cars may need to pay greater attention to using “service mode” settings to manage communications and access while vehicles are under repair, including during test drives.

Service Mode limits remote access to the vehicle, implements a speed limiter, and allows for the repair facility to conduct necessary steps in troubleshooting and repairing the vehicle.


Featured image: Tesla logo courtesy of Tesla

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