Appeals court to reconsider class ruling in suit against State Farm claiming undervalued total losses
A breach of contract lawsuit filed in Tennessee against State Farm over alleged undervalued total losses could lose its class action status following a Jan. 29 Sixth Circuit Court of Appeals decision vacating its earlier judgment.
Instead, the appeals court judges have returned the case to the docket. The court previously affirmed the district court’s class certification and remanded the case for further proceedings.
State Farm appealed the case, alleging that the district court erred in granting class status because the individualized nature of each plaintiff’s claim, including car valuation, contractual appraisal provision, and damages, does not meet the class status commonality and predominance requirements.
The Tennessee complaint is similar to those brought in six other states — Alaska, Illinois, Kentucky, Mississippi, North Carolina, and West Virginia. Cases in Kentucky and Mississippi were thrown out in October.
CarPro reports that the appeals court’s decision to reconsider is relatively rare and “signals disagreement among judges about how broadly class actions should be allowed in insurance disputes.”
The class of plaintiffs is reportedly 90,000 according to other news sources; however, the amended complaint states the number of class members is too numerous to report. All are current or former State Farm policyholders, or were covered by State Farm insurance, while living in Tennessee. They claim to be underpaid for their totaled vehicles.
The suit was first filed in May 2020 by Jessica Clippinger and amended the next month. The case was moved to federal district court, and State Farm’s motion for summary judgment was denied; however, its motions for appraisal and a stay pending appraisal were granted. Audatex is also a named defendant in the case.
State Farm systematically bases its valuations and payments of total loss claims on manipulated data and reports that don’t meet the duties of its insurance contracts, “imposing unreasonable, inappropriate, and unspecific Typical Negotiation Adjustments to artificially reduce the values of comparable vehicles,” the suit states.
“Moreover, these deductions have no basis in fact and significantly understate the actual cash value of insureds’ total loss vehicles,” it states.
“Upon information and belief, to calculate its valuations and claims payments, State Farm obtains a market valuation report from a third-party company called Audatex. Audatex uses a software program called ‘Autosource Market-Driven Valuation’ (AMDV) to calculate the value of a total loss vehicle. The AMDV software was designed for use by insurance companies and is not an objective industry source used to determine the actual retail cost of used cars. The AMDV software program purports to contain values for comparable vehicles recently sold or for sale in the geographic area of the insured. The valuation reports generated by the AMDV software program also purport to contain values for the loss vehicle based upon the data for the comparable vehicles in the report.”
However, the plaintiffs claim that State Farm instructs Audatex on the specific data to include in the reports as the basis for valuations, including whether to apply a Typical Negotiation Adjustment (TNA) to the comparable vehicles.
Specific to Clippinger’s total loss claim, the suit states that State Farm determined the actual cash value to be $14,490.001, which was based on a market valuation report from Audatex using the AMDV software program.
The report listed the values of four comparable vehicles and applied a Typical Negotiation Adjustment of 8.5% to each vehicle without itemizing or explaining the basis of the adjustment and/or how the deduction value was determined, according to the suit.
“The use of the Typical Negotiation Adjustment to adjust plaintiff’s total loss claim downward violates the applicable insurance policy, in that defendant applied the improper adjustment to pay plaintiff less than the actual cash value of her total loss vehicle,” the suit states.
State Farm also allegedly breached the covenant of good faith and fair dealing by using the TNAs in determining total loss values.
The plaintiffs are seeking full compensatory damages for each class member equal to what State Farm allegedly wrongfully deducted from its insureds’ payments in the form of TNAs. Or, alternatively, an order requiring State Farm to prepare a total loss valuation for Clippinger and each class member without TNAs or any other deductions that are “arbitrary, unmeasurable, indiscernible, nonitemized, or not as specific as reasonably possible or appropriate as to dollar amount,” the suit states.
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