California Issues Cease and Desist over Illegal Extended Warranties

The California Department of Insurance issued a cease and desist order on Omega Vehicle Services LLC, doing business as Delta Auto Protect, and its controlling manager, Charles Seruya, in May for allegedly selling illegal vehicle service contracts to over 20 California consumers.

The order alleges both Delta Auto Protect and Seruya were not licensed by the CDI and improperly denied claims, illegally sold contracts they did not first file with the department directly to consumers, and used an unapproved backup insurer.

Under the order, Delta and Seruya are to immediately stop selling VSCs in any capacity and cease acting as an insurance agent or producer or in any other capacity in the state for which they do not hold a valid license, permit, or certificate of authority.

Generally, VSCs, often called ‘extended warranties,’ are offered to consumers by car dealers when they buy a car. Most typically provide coverage for repairs due to mechanical failure. Others offer coverage for routine services, such as oil changes and tire rotation, or other services such as paintless dent removal, glass or key replacement, or tire and wheel repair.

VSCs may be sold legally to Californians only when specific criteria are met, which Delta and Seruya failed to do:

• Every VSC must be filed with CDI before it can be sold.
• Companies responsible for paying the claims on VSCs must be licensed by CDI, unless the company is a vehicle manufacturer, distributor or dealer.
• These companies must carry CDI-preapproved backup insurance insuring every VSC they sell, unless they receive an exemption from CDI by proving their company has a net worth of at least $100 million.
• VSCs can only be sold through dealerships licensed by the Department of Motor Vehicles. Direct sales to consumers are illegal.