CBS explores State Farm suits that claim company software calculated actual cash values too low
State Farm is battling lawsuits in multiple states that claim the company used software to calculate actual cash values too low, according to a CBS News report.
The newscast focuses on a recent Arkansas case, where the jury found State Farm shortpaid customers after their vehicles were totaled.
Rose Chadwick, a plaintiff in the case, told CBS she realized the insurance company underpaid her for her 2011 Hyundai after learning about other potential legal action against the company.
Chadwick became the lead plaintiff in a case originally filed in the Eastern District of Arkansas Central Division federal court in 2021. The class action complaint states that State Farm used Audatex North America valuation reports to determine the actual cash value of the total loss vehicles, thumbing the scale against insureds when calculating the actual cash value of their total loss vehicles by applying so-called “typical negotiation adjustments.”
Chadwick’s attorneys argued that the “typical negotiation adjustments” were a potential discount from used car dealers, CBS reports. It adds that the “haggling discount” is no longer consistent with how modern-day used cars are priced and sold.
“The computer program that State Farm used to calculate the replacement value of the car did it systematically unfairly,” one of Chadwick’s attorneys, Brian Glasser, told CBS.
He said his firm argued that the commonly used software systematically low-balled the value of total loss cars for tens of thousands of drivers across the country.
An Arkansas federal jury ruled in favor of 37,000 plaintiffs in June, the CBS newscast says. It determined Chadwick was underpaid by about $600 for a car worth $4,700.
State Farm has argued that the software it used was standard for most vehicle insurance companies at the time and that it no longer uses the same program to calculate reimbursement amounts.
In a joint status report filed Tuesday, State Farm said it is diligently attempting to develop a method that would allow the company to pull Autosource Reports from claim files with minimal manual review.
Solera describes Autosource as an independent valuation service powered by a comprehensive vehicle database that is constantly being updated with vehicle records added to the system to ensure comprehensive and accurate total loss values.
In the joint status report, State Farm says there are several technical challenges to manual review, including complications involving claim files with multiple Autosource Reports due to revisions, requests, disputes, or the presence of both first- and third-party claimants.
The company expects it will begin rolling production of Autosource Reports by the end of September.
“State Farm always seeks to pay what we owe within the terms of the policy to help our customers recover from a loss,” the company said in a statement to CBS News.
“We work with the policyholder to determine the actual cash value of a total loss vehicle, considering the age, condition, equipment, and mileage of the vehicle at the time of the loss,” the company said.
It added that each customer is “also invited to share additional information and has the option to use a third-party appraisal to help reach agreement on the value of their totaled vehicle.”
State Farm also told CBS that appellate courts are split on whether the cases can be brought in the form of a class action lawsuit or if each reimbursement case is unique.
“State Farm moves billions of dollars to people for their broken cars every year, and insurance companies around America do similar numbers,” Glasser said to CBS. “So we’re talking about these computer programs that calculate the value of your replacement vehicle that affect billions of dollars every year.”
CBS reports there are similar cases against multiple insurance carriers in 19 states and that regulators have started to weigh in on whether insurers must change the way they value total loss vehicles.
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