Department of Insurance Issues Cease and Desist Orders to Protect Consumers from Illegal Extended Warranty Contracts

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By Jennifer Wilczynski

Between April and October of 2020, the California Department of Insurance (DOI) issued multiple cease and desist orders preventing unlicensed businesses from illegally selling Vehicle Service Contracts (VSCs), or extended warranties. VSCs typically provide extra coverage for damages incurred by mechanical failures as well as some routine services such as oil changes and glass replacement. VSCs must be filed with DOI, unless sold by a vehicle manufacturer, and can only be sold through Department of Motor Vehicle licensed car dealerships. Further, companies selling the VSCs must have preapproved back-up insurance.

On April 29, 2020, DOI issued a cease and desist order against Omega Vehicles, LLC doing business as Delta Auto Protect as well as its manager, Charles Seruya, for selling VSCs to twenty-eight individual consumers dating back to 2015. DOI alleges that Delta Auto Protect and Seruya were not licensed by DOI, systematically denied claims, sold contracts without filing with DOI first, and used an unapproved back-up insurance company. In the order, DOI demanded that Delta Auto Protect and Seruya stop selling VSCs and rescind all unlicensed insurance actions. DOI further alleged in its order that these violations of the Insurance Code may constitute felonies and be subject to fines of up to $500,000.

Subsequently, on October 9, 2020, DOI filed an amended cease and desist order and order to show cause against Seruya and Delta Auto Protect, for selling over $2 million in illegal VSCs. Since the initial order, additional discovery revealed that over 1,000 California consumers fell victim to Seruya’s actions. DOI alleges that Delta Auto Protect and Seruya could potentially face a $5,000-per-day penalty for conducting insurance transactions without a license.

On August 26, 2020, DOI issued a cease and desist order against Elite Integrity, LLC, doing business as Auto Protection Plus (APP) in Orange County, as well as its controlling manager, Kamisha Daniel, for selling illegal VSCs since 2018. DOI alleges that APP and Daniel directly and illegally sold VSCs without a license to several California residents, a violation of the requirement that sales of VSCs be conducted through DOI. DOI ordered APP and Daniel to stop selling VSCs immediately and cease acting as an insurer in any capacity in which they are not licensed.

DOI’s May 4, 2020 press release and August 28, 2020 press release direct Californians who purchased these illegal VSCs to contact the designated DOI investigators. DOI also has a complaint hotline for similar claims.

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