Legal Decision Over Insurance Payout
An Arkansas jury has recently determined that a prominent car insurance provider failed to deliver fair compensation to customers whose vehicles were deemed “totaled” following accidents. This verdict could inspire similar lawsuits in other states.
Challenging the Valuation Method
Rose Chadwick, the lead plaintiff from Arkansas, initially felt the reimbursement for her totaled 2011 Hyundai was fair, stating, “because that’s what I pay them for, is to be fair with me.” However, upon discovering potential legal actions scrutinizing the calculation methods of State Farm, she chose to take her concerns to court.
Chadwick’s legal team contended that the company relied on software to estimate the replacement value of her vehicle. This program included considerations such as potential negotiation discounts from used car dealers, which her attorneys argued no longer reflect the contemporary pricing practices of used cars.
“The computer program that State Farm used to calculate the replacement value of the car, did it systematically unfairly,”
affirmed Chadwick’s attorney, Brian Glasser. He emphasized that the software in question led to undervalued assessments for countless drivers nationwide.
Verdict and Ongoing Litigation
In June, an Arkansas federal jury sided with Chadwick and 37,000 other plaintiffs, concluding that Chadwick had been undercompensated by approximately $600 for her car, valued at $4,700.
State Farm is currently contesting lawsuits regarding this issue across various states. The company claims that the method they employed was standard practice among automobile insurers at that time, and it no longer uses the same program for calculating reimbursements.
“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 stated in a communication to CBS News. They added that they collaborate with policyholders to assess the actual cash value of a total loss vehicle, factoring in age, condition, equipment, and mileage. Customers are also encouraged to provide additional information and utilize third-party appraisals for a fair valuation.
Generally, a “totaled” vehicle is defined as one that has sustained damage requiring repair costs exceeding the vehicle’s value.
State Farm representatives noted that appellate courts in diverse jurisdictions have concurred with their stance that challenges to the reimbursement process are not suitable for class-action status, which was the case in Arkansas. The legal community remains divided over whether each reimbursement case should be treated individually or if customers facing similar valuation issues can sue collectively.
Background of the Case
The origins of Chadwick’s case trace back five years, when her daughter borrowed the car for a quick errand and was involved in a rear-end collision at an intersection. Following a social media update concerning the reimbursement issue, Chadwick emerged as the lead plaintiff in a class action lawsuit against State Farm, accusing the insurer of undervaluing losses and underpaying on claims.
“State Farm moves billions of dollars to people for their broken cars every year and, insurance companies around America do similar numbers,”
stated Glasser, noting the significant financial implications of these computer programs used to determine vehicle replacement values.
Attorneys are initiating comparable legal actions against several insurance companies in at least 19 states, while regulators in some regions assess whether insurers need to reform their total loss car valuation methods.
State Farm assures customers that they have avenues for recourse if they are dissatisfied with the estimates provided for totaled vehicles. Customers are encouraged to inquire about the methods used to derive payout amounts, negotiate an agreeable price, and obtain independent appraisals of their vehicle’s worth.
Ultimately, for Chadwick, the dispute transcended monetary concerns and centered on principles.
“It was like hiding something and you shouldn’t hide,”
she expressed.
