State Farm Mutual Auto Insurance “Typical Negotiation Adjustment” Class Action

If your car is totaled in an accident, how does your insurance company calculate its payout of the actual cash value (ACV)? The complaint for this class action alleges State Farm Mutual Automobile Insurance Company has its vendor determine the price of comparable vehicles, then subtracts what the complaint calls “an arbitrary and baseless flat-rate adjustment” it calls a “typical negotiation adjustment.”

The class for this action is all persons insured by State Farm Mutual in any state who, from the earlier allowable time through the date this case is resolved, received a first-party, total-loss valuation and payment on an automobile total-loss claim that included a “typical negotiation adjustment” or a similarly-titled adjustment. Illinois and North Carolina Subclasses have also been defined.

According to the complaint, the adjustment “is not based on any negotiations, typical or otherwise, and is not based on any market realities.” Instead, the complaint says, it is between 4% and 11% of the value of the vehicle, with a larger percentage subtracted from older vehicles than newer ones.

The complaint alleges, “This percentage reduction artificially reduces the total-loss payment for the totaled vehicle and, with the sliding percentage scale, ensures that every total loss payment [State Farm] makes to insureds is significantly, but unconscionably, reduced.”

If a dispute arises over the ACV, State Farm policies provide for an appraisal of the loss. Each party is to hire an appraiser, at its own expense, and then to share the cost of an umpire selected by the two appraisers. Because this involves spending money, the complaint claims, State Farm “knows and intends that the insureds will forego the appraisal process and accept the artificially determined loss[ ]payment for the total-loss claims.”

One of the plaintiffs in this case, Maria Munoz, had her 2020 Ford Escape totaled in February 2021. State Farm valued it at $26,067. The valuation report, provided by vendor Audatex, lists four comparable vehicles and shows a “typical negotiation adjustment” of approximately 4% applied to each of them “without itemizing or explaining the basis of each adjustment and/or how the value of the deduction was determined.”

The other plaintiff, Sandra Smiling, had a 2014 Nissan Altima that was declared a total loss around August 2019. State Farm valued it at $5,181. Audatex also submitted the valuation report listing four comparable vehicles, along with a “typical negotiation adjustment” of roughly 6-8% to each of the vehicles “without itemizing or explaining the basis of each adjustment and/or how the value of the deduction was determined.”

This deduction, the complaint alleges, “does not reflect market realities[.]” The complaint asserts that “it is increasingly the practice in the used car market to avoid price negotiation by implementing ‘no haggle’ pricing, particularly as to [I]nternet-posted prices.” In particular, the complaint claims, since Covid-19 created supply-chain problems, used vehicles are now selling at higher prices than formerly.

According to the complaint, State Farm violates consumer protection laws, breaches its contracts, and violates the covenant of good faith and fair dealing.

Article Type: Lawsuit
Topic: Insurance
Tags: Actual Cash Value, Auto Insurance, Incomplete payment of benefits due, Insurance