A Federal judge has ordered a class action lawsuit to proceed against State Farm that was filed by more than 20 plaintiffs. The lawsuit accuses State Farm underpaying actual cash values (ACV) on total loss vehicles. The complaint alleges State Farm paid 4-11% less than what was owed by applying a discount, or “typical negotiation adjustment,” to the ACV of used vehicle internet prices similar to the ones involved in the claims. The suit calls this “a fraudulent scheme” and a breach of their insurance policy contracts.
According to the plaintiffs, State Farm instructs their data providers Audatex and AudaExplore to apply discounts not based on negotiations and not reflecting market realities. They went on to allege State Farm is ignoring the realities of no-haggle pricing common in the used car market. Common law and statutory violations under the laws of 47 states and Washington D.C. along with 25 consumer protection laws are alleged, including breach of covenant of good faith and fair dealing, unjust enrichment, and violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act. The suit seeks unspecified damages, costs, and pre- and post-judgment interest, as well as an injunction against State Farm.
Federal Judge Virginia M. Kendall wrote in her Dec. 21 order that State Farm failed to inform policyholders about the typical negotiation adjustment before they bought their policies. “Rather, in the policy – which was consistent across all of Plaintiffs’ states… State Farm shall ‘[p]ay the actual cash value of the covered vehicle minus any applicable deductible….’ Further, it states ‘[i]f a deductible applies to Comprehensive Coverage, then it is shown on the Declarations Page. The deductible that applies to the Collision Coverage is shown on the Declarations Page.’”
Plaintiff Diane Newkirk, a New York resident, owned a 2015 Subaru Impreza insured by State Farm which was declared a total loss in January 2021. “The market valuation report, dated February 1, 2021, was attached to the letter… Yet, on the report, State Farm, through Autosource, applied a typical negotiation adjustment of approximately 4-6% across comparable vehicles to arrive at a lower valuation,” the order states. “Moreover, Newkirk’s Declarations Page listed the various premiums, deductibles, and expenses associated with her claim, but it did not mention a typical negotiation adjustment.” Kendall denied State Farm’s motion to dismiss for failure to state a claim, which she called improper according to federal Rules. The judge noted that State Farm faces several concurrent lawsuits that challenge its use of a typical negotiation adjustment to determine total loss payments.
There was another case where Joseph Wayne Collins sued State Farm for deducting money from his total loss settlement, Collins was eventually awarded $288,517.59 by a jury in July. The court heard that the funds were deducted to cover pre-repair work completed during a short window when State Farm had deemed the vehicle repairable. After it received the repair estimate it declared the vehicle a total loss and paid the repair shop for its work, only to deduct those fees from Collins’ settlement. State Farm initially offered Collins $13,450 for the truck but agreed to pay him $16,000 plus taxes after Collins hired appraiser Robert McDorman to conduct a third-party appraisal, which determined the vehicle’s value to be higher.
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