State Farm accused of evading discovery in lawsuit over total loss values

Plaintiffs say State Farm has been less than forthright in their lawsuit "discovery" phase.

By John Hilton

In a new court brief, plaintiffs accuse State Farm of "evasive tactics" during the discovery phase of a class-action lawsuit over vehicle loss assessments.

"In a blatant attempt to obscure the truth and shield itself from accountability, State Farm
has employed a series of evasive tactics, refusing to comply with its discovery obligations and
disclose critical evidence substantiating Plaintiffs’ well-pled claims," the court brief states.

Filed in Illinois, where State Farm is headquartered, the ongoing lawsuit accuses the insurer of "a fraudulent scheme" to undervalue vehicle loss claims. The class action is up to 33 plaintiffs with totaled vehicles who submitted claims to State Farm, according to court documents.

Plaintiffs filed their lawsuit in March 2022 and spent months in 2023 trying unsuccessfully to get State Farm to product information on its use of “typical-negotiation adjustment,” court documents say. The lawsuit alleges that State Farm used TNA to reduce the total-loss amount of totaled vehicles.

"Defendant has refused to directly answer basic questions about when it first started using a TNA, or provide any information from the period before it began using Audatex, the vendor that provided State Farm the purported valuations for each of the Plaintiffs’ totaled vehicles," the brief states.

A spokeswoman for State Farm did not reply to a message seeking comment.

Plaintiffs asked Judge Virginia M. Kendall to compel State Farm to turn over documents it has requested. In December, Kendall denied State Farm's motion to dismiss the lawsuit filed in U.S District Court for the Northern District of Illinois.

Systematic fraud alleged

State Farm is accused of applying an across-the-board adjustment of 4-11% to vehicle total loss valuations. The TNA adjustment "was not based on any empirical data derived from actual negotiations," the new brief states. "Rather, this downward 'adjustment' was entirely arbitrary and unrelated to Defendant’s policies with its insureds, including Plaintiffs, who paid their premiums expecting they would receive the full policy benefits they bargained for, but they were defrauded."

Plaintiffs note that State Farm does not apply the adjustment in California because it was sued there in 2008 and agreed to stop the practice. State Farm settled recent lawsuits over its coverage and claims policies in Montana and in Kentucky.

A provision of the State Farm policy in question requires the parties to submit to an appraisal if there is a disagreement over the value of the vehicle, the complain states, calling it "an integral part of the defendant's fraudulent scheme."

"Since the amount by which the insureds’ total-loss claims are underpaid is likely less (or only marginally greater) than the cost of the appraisal, Defendant knows and intends that the insureds will forego the appraisal process and accept the artificially determined loss-payment for their total-loss claims," the lawsuit reads. "As designed by Defendant, the appraisal provision prevents Plaintiffs and the Class from effectively vindicating their rights under the Policy."

Not about the cash value, plaintiffs say

The dispute is not about the actual cash value, plaintiffs say in the lawsuit.

"This case challenges Defendant’s systematic and fraudulent scheme to misvalue insureds’ vehicles that are declared a total loss in a manner which does not comport with representations made by Defendant or obligations undertaken by Defendant in its Policy, in order to illegally increase its own profits," the lawsuit reads. "This is an issue that cannot be resolved through an appraisal process."

State Farm announced a 2023 net loss of $6.3 billion last week.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.