Undervalued ACV lawsuit against State Farm will continue, judge rules arguments are ‘plausible’
A North Carolina class action lawsuit against State Farm will continue while a court-ordered vehicle appraisal is conducted.
The suit alleges State Farm is systematically lowering the actual cash values (ACVs) it pays on total loss claims. In response, State Farm asked the court to stay the case pending an appraisal of the plaintiff’s vehicle. U.S. Chief District Judge Catherine C. Eagles ordered the appraisal and denied staying the case while it’s conducted. She also denied State Farm’s motion to dismiss the case.
State Farm allegedly reduced the retail cost of vehicles comparable to total losses to reduce payouts by 4–9%, according to the suit. It alleges violations of North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA) and Unfair Claims Settlement Practices Act (UCSPA), as well as breach of contract specific to plaintiff Craig Brewer.
Brewer contends that State Farm’s alleged reduction decreased his payout by 5.5%.
Eagles ruled that Brewer has “alleged sufficient facts to establish standing and to state plausible claims.”
“State Farm contends that the appraisal provision is a mandatory precondition to suit, and unless Mr. Brewer’s car is appraised for less than the value he alleges, he cannot establish any concrete harm arising from State Farm’s alleged breach of contract or unfair and deceptive trade practices,” Eagles wrote in her order.
“State Farm’s argument is unpersuasive. The policy’s appraisal provision is not mandatory; it explicitly provides that either party ‘may demand an appraisal.’ …Since the plain language of the appraisal provision is permissive, appraisal is not a precondition to filing suit… State Farm had a contractual duty to pay actual cash value before the appraisal, not just after.”
She added that all of Brewer’s claims clear the plausibility bar, and he has stated a plausible breach of contract claim. She ruled that Brewer has also sufficiently stated his UDTPA claims.
“Taking the factual allegations of the complaint as true, it is plausible that State Farm is committing an unfair trade practice by systemically underpaying claims,” Eagles wrote. “Mr. Brewer identifies a number of potential problems with the alleged double-deduction used by State Farm and a number of ways State Farm’s practices violate applicable insurance regulations.
“Once the facts are clearer, the Court will be in a better position to evaluate whether State Farm’s actions constitute a per se unfair trade practice, an unfair trade practice in light of all the circumstances, or no violation at all.”
Eagles also denied State Farm’s motion to strike class allegations because, at this stage, it has not demonstrated its argument that the “class action allegations show non-compliance with Rule 23 [class action requirements] as a matter of law.”
The case was referred to the magistrate judge for an initial pretrial conference.
Separate class action suits have also been filed on behalf of policyholders in Alaska, Illinois, Kentucky, Mississippi, Tennessee, and West Virginia. Cases in Kentucky and Mississippi were thrown out in October.
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