When a vehicle is deemed a total loss, the insurance company must determine the actual cash value (ACV) for the insurance payout. This is generally derived from the prices of comparable vehicles in the same area. But the complaint for this class action alleges that State Farm Automobile Insurance Company subtracts a substantial amount from these prices for something it calls a Typical Negotiation Adjustment, even though it has no documentation that such an adjustment is possible.
The class for this action is all persons insured by an auto insurance contract issued by State Farm Mutual Automobile Insurance Company to an Arkansas resident who, from the earliest allowable time through the date this action is resolved, received a first-party total loss valuation and payment that was adjusted downward with a Typical Negotiation Adjustment or a similar adjustment.
In figuring the ACV for totaled vehicles, State Farm uses valuation reports from Audatex North America, Inc. But it doesn’t just use the prices Audatex has found. Instead, according to the complaint, it subtracts from them a Typical Negotiation Adjustment, “without any documentation that the assumed discount [is] available.”
The complaint alleges that the adjustment assumes that insureds can always negotiate a reduction in the prices listed for vehicles, even though that “would be highly atypical and contrary to the modern used car industry’s market pricing and inventory management practices.”
The plaintiff in this case, Rose Chadwick, insured her 2011 Hyundai Elantra with State Farm. She had an accident, and the vehicle was deemed a total loss in December 2020.
State Farm valued the total loss claim at $4121 and paid her $1,383.47. The payout was calculated by taking the prices of four different vehicles similar to hers that were advertised online, then subtracting a Typical Negotiation Adjustment of roughly 9% from each one.
According to the complaint, such adjustments “are unfounded, are factually erroneous, and result in State Farm paying [Chadwick] less than the actual cash value of her total loss vehicle that she was entitled to by contract.”
Typical Negotiation Adjustments are anything but typical, the complaint alleges, because they “do not reflect market realities and run contrary to customary automobile dealer practices and inventory management, where list prices are priced to the market to reflect the intense competition” that exists because consumers can comparison shop online.
The complaint points out that time is also a factor when people lose their vehicles without warning: “Insureds who have suffered a total loss of their vehicle and need to procure a replacement have limited time to search out the illusory opportunity to obtain the belowmarket deal State Farm assumes, wrongly, to always exist.”
The adjustments also “are contrary to appraisal standards.” Different appraisal methods exist, and State Farm starts out using one of them, with normal documentation and verifiable data; but the complaint claims, it then abandons it and applies its own adjustments, which are undocumented and unverifiable.
Article Type: LawsuitTopic: Insurance
Most Recent Case Event
State Farm Mutual Auto Insurance “Typical Negotiation Adjustments” Arkansas Complaint
November 29, 2021
When a vehicle is deemed a total loss, the insurance company must determine the actual cash value (ACV) for the insurance payout. This is generally derived from the prices of comparable vehicles in the same area. But the complaint for this class action alleges that State Farm Automobile Insurance Company subtracts a substantial amount from these prices for something it calls a Typical Negotiation Adjustment, even though it has no documentation that such an adjustment is possible.
State Farm Mutual Auto Insurance “Typical Negotiation Adjustments” Arkansas ComplaintCase Event History
State Farm Mutual Auto Insurance “Typical Negotiation Adjustments” Arkansas Complaint
November 29, 2021
When a vehicle is deemed a total loss, the insurance company must determine the actual cash value (ACV) for the insurance payout. This is generally derived from the prices of comparable vehicles in the same area. But the complaint for this class action alleges that State Farm Automobile Insurance Company subtracts a substantial amount from these prices for something it calls a Typical Negotiation Adjustment, even though it has no documentation that such an adjustment is possible.
State Farm Mutual Auto Insurance “Typical Negotiation Adjustments” Arkansas Complaint