Cease and Desist Order targets illegal vehicle extended warranty sales and denial of consumers’ claims

News: 2022 Press Release

SACRAMENTO, Calif. - The California Department of Insurance issued Orders to Cease and Desist and to Show Cause effective immediately upon Ideal Group, Inc. doing business as Ideal Auto Protect and its owners Richard and Daniel Beda for allegedly selling illegal Vehicle Service Contracts (VSCs), also known as “extended warranties” to 12 California consumers totaling over $22,000. The company was not properly licensed by the Department, as required by law, and improperly denied claims by failing to prove the claim was not covered.

The Orders also allege Ideal and its owners illegally sold contracts that they did not first file with the Department, sold their contracts directly to consumers online and over the phone instead of through car dealerships as required by California law, and failed to use a backup insurer to safeguard consumers.

“My Department is using all tools available to protect consumers from unlicensed and illegal insurance,” said Insurance Commissioner Ricardo Lara. “Illegally selling vehicle warranties to Californians online or by telephone and then improperly denying their claims leaves consumers without protection when they need it most." 

The Department ordered Ideal and its owners to immediately stop selling VSCs in any capacity and cease acting as an insurance agent or producer in California since they do not hold a valid license, permit, or Certificate of Authority. The company could face a $5,000-per-day penalty if it fails to comply.

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.    

Consumers should not be buying these VSCs or “extended warranties” over the phone or internet and should always check to see that the company is licensed in California before buying. They can check license status on the Department’s website here. If any consumer may have purchased a VSC from Ideal they are urged to contact the Department at 800-927-4357.

VSCs may be sold legally to Californians only when specific criteria are met, which Ideal failed to do, namely:

1. VSCs can only be sold through automobile and watercraft dealerships licensed by the California Department of Motor Vehicles. Direct sales to a consumer is illegal.
2. Every VSC must be filed with the Department before it can be sold.
3. Companies responsible for paying the claims on VSCs must be licensed by the Department, unless the company is a vehicle manufacturer, distributor, or dealer.
4. 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.

# # #

Media Notes:

• Cease and Desist Order and Order to Show Cause
• More information about Vehicle Service Contracts (VSCs).