LOS ANGELES-On October 12, 2020, the California Department of Insurance (CDI) announced it issued an amended Cease and Desist Order and Order to Show Cause effective immediately to Omega Vehicle Services, LLC doing business as Delta Auto Protect (Delta), and its controlling manager, Charles Seruya, for allegedly selling more than $2 million in illegal Vehicle Service Contracts (VSCs).
Earlier in the year, CDI issued an initial Order after learning Delta Auto Protect and Seruya had allegedly victimized more than 20 California consumers. As a result of discovery and additional consumer complaints received since then, CDI learned the number of victims is now more than 1,000 throughout the state.
“CDI investigators and detectives work to protect unsuspecting consumers who are simply trying to protect themselves and their investments by purchasing warranties and insurance,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona. “Unfortunately, there is much illegal and fraudulent activity in the insurance industry that preys on consumers, hence the need for these investigations.”
Under the Orders issued, the company faces a potential $5,000-per-day monetary penalty for transacting insurance business without a license.
The Orders allege both Delta Auto Protect and Seruya were not licensed by the California Department of Insurance and improperly denied claims, illegally sold contracts online that they did not first file with CDI directly to consumers and used an unapproved backup insurer.
Under the Orders, 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 of California for which they do not hold a valid license, permit, or Certificate of Authority and show cause why a $5,000-per-day penalty against them should not issue.
Generally, VSCs, often called “extended warranties,” are offered to consumers by car dealers when they buy a car. Most VSCs 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, namely:
- Every VSC must be filed with the Departmentbefore it can be sold.
- Companies responsible for paying the claims on VSCs must be licensed by the Department, unless the company is a vehicle manufacturer, distributor, or dealer.
- These companies must carry Department-preapproved backup insurance insuring every VSC that they sell, unless they receive an exemption from the Department by proving their company has a net worth of at least $100 million.
- VSCs can only be sold through dealerships licensed by the California Department of Motor Vehicles. Direct sale to a consumer is illegal.