When an insurance company pays you the actual cash value (ACV) of a totaled vehicle, what is included in that amount? The complaint for this class action alleges that State Farm Mutual Automobile Company should, but does not, include the sales tax that will be charged on a new vehicle.
At issue in this case are State Farm auto insurance policies taken out for private passenger auto physical damage including comprehensive and collision coverage. The complaint alleges that the policies oblige State Farm to pay sales tax on the amount calculated for the total loss of an insured vehicle.
However, “actual cash value” is not defined in the policy.
The complaint alleges that the amount of sales tax owed is not the amount of sales tax originally paid or the amount of sales tax that will be paid when buying a replacement vehicle. “[I]nstead, the amount of sales tax owed is based on the underlying adjusted vehicle value of the total loss vehicle at the time of loss…”
The payout for sales tax, according to the complaint, is not contingent on any amount being actually spent on sales tax. The insured is free to buy another car or not do so.
The state of California imposes sales tax on every purchase of a vehicle in the state. Sales tax is therefore a mandatory cost when a person buys a new car. There is no exception for replacements for total loss vehicles. The complaint alleges, “Sales tax is incontrovertibly an element of the replacement cost of the vehicle and is therefore incontrovertibly an element of the ACV of the insured vehicle.”
Unfortunately, the complaint alleges that State Farm uniformly does not pay this sales tax in its ACV payouts.
In this case, plaintiff Joan St. Julian owned a 2010 Bentley Continental GTC Speed Turbo 4WD 2D Convertible. On or around March 18, 2021, St. Julian had an accident, and State Farm declared the Bentley a total loss. The company decided that the adjusted value of the vehicle was $72,219. It added title transfer fees of $15, subtracted the policy’s deductible of $500, and arrived at a payout of $71,734.
However, St. Julian’s tax rate is 10.25%, including state sales tax of 6% and local tax of 4.25%. The complaint claims, “Thus, the ACV sales tax owed as a part of the ACV of the insured vehicle was $7,402.45.”
The class for this action is all individuals insured under a California policy issued by State Farm Mutual Automobile Insurance Company that covers a vehicle with private-passenger auto physical damage coverage with comprehensive or collision coverage, who made a first-party claim after State Farm determined the vehicle to be a total loss, and where the total loss payment did not include sales tax calculated as the applicable state and local percentage of the adjusted vehicle value, between September 23, 2017 and the date of the certification of the class in this case.
Article Type: LawsuitTopic: Insurance
Most Recent Case Event
State Farm Mutual Auto Insurance Sales Tax on Total Losses California Complaint
September 23, 2021
When an insurance company pays you the actual cash value (ACV) of a totaled vehicle, what is included in that amount? The complaint for this class action alleges that State Farm Mutual Automobile Company should, but does not, include the sales tax that will be charged on a new vehicle.
State Farm Mutual Auto Insurance Sales Tax on Total Losses California ComplaintCase Event History
State Farm Mutual Auto Insurance Sales Tax on Total Losses California Complaint
September 23, 2021
When an insurance company pays you the actual cash value (ACV) of a totaled vehicle, what is included in that amount? The complaint for this class action alleges that State Farm Mutual Automobile Company should, but does not, include the sales tax that will be charged on a new vehicle.
State Farm Mutual Auto Insurance Sales Tax on Total Losses California Complaint