State Farm, plaintiffs trade barbs in lawsuit over total loss values

State Farm says all major insurers use one of three vehicle loss valuation tools.

By John Hilton

State Farm is scheduled to argue for a partial summary judgment Thursday before a federal judge in Illinois as it defends another class-action lawsuit over vehicle loss assessments.

Plaintiffs claim the insurer is utilizing another stall tactic in the ongoing legal dispute.

“As this Court recently acknowledged, State Farm’s piecemeal and successive motions have already ‘delayed this litigation by months,’” plaintiffs’ response reads. “State Farm’s present Motion, seeking leave to file a second motion for summary judgment, to then be followed by a third motion for summary judgment, is more of the same and will only further delay proceedings and waste judicial resources.”

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.

In December, a judge denied State Farm's motion to dismiss the lawsuit filed in U.S District Court for the Northern District of Illinois.

In a court brief earlier this month, plaintiffs accused State Farm of "evasive tactics" during the discovery phase, which was supposed to wrap up Friday under a schedule set by the court in July 2023. Instead, parties are scheduled to meet Monday for a status conference and probable new timeline.

Plaintiffs filed their lawsuit in March 2022 and spent months in 2023 trying unsuccessfully to get State Farm to produce 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.

State Farm: standard practice

In its own motion filed March 15, State Farm said that its use of third-party Audatex, a vehicle valuation service, is standard industry practice. “Every major insurer” uses one of the three third-party vehicle valuation services for market research to help estimate the actual cash value of totaled vehicles: Audatex, Mitchell, and CCC.

“Each has its own proprietary methodology for valuing total loss vehicles, and each makes a series of adjustments to accurately estimate actual cash value,” State Farm said. “Audatex has provided market valuations of vehicles for business clients—such as insurers, rental vehicle companies, and major retailers—for over 30 years.”

State Farm is accused of applying an across-the-board adjustment of 4-11% to vehicle total loss valuations. The adjustment "was not based on any empirical data derived from actual negotiations," the plaintiff's 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.

"Regulatory authorities in every state that require approval have inspected and approved Audatex for this use, including in many of Plaintiffs’ home states," State Farm said in its March 15 brief. "Despite these publicly available facts, and absolutely zero evidence that any Plaintiff was unaware of how his or her vehicle was valued before explicitly agreeing to the valuation, Plaintiffs do their best to create a false narrative of alleged fraud apparently to obscure what is, at bottom, a meritless discovery motion."

'Largely irrelevant'

In its motion to compel discovery, plaintiffs say State Farm has not provided information about the 2006 California lawsuit, Garner vs. State Farm Mutual Insurance Co. That case ended with State Farm paying out a settlement over its use of "projected sold adjustment," a similar method of adjusting claims payments.

"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 plaintiffs' motion reads.

In its response, State Farm argues that the 16-year-old Garner case is "largely irrelevant" to the present litigation.

Plaintiffs in that case alleged that State Farm, through its use of Mitchell’s vehicle valuation service, violated 2003 amendments to California’s total loss regulation that required insurers to use only “the asking price or actual sale price” of a comparable car.

"Plaintiffs alleged that because Mitchell used a 'projected sales price' and an 'ad-age adjustment' in some of its vehicle valuations, State Farm had violated the regulation," State Farm said.

The main issue in the case concerned the effective date of the regulation, the insurer said. Because the actual sale price data was not available to any insurer, the California Department of Insurance had agreed to stay the effective date of the regulation until “sixty days after sales price data becomes available from the Department of Motor Vehicles,” State Farm's motion explains.

State Farm contended that because no exact sales price data had become available, the regulation had not yet taken effect at the time of the named plaintiff’s total loss in April 2007. The court later rejected that argument.

Following that decision, the parties settled the case in 2009.

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.