A federal judge won’t put the brakes on a class action accusing State Farm of fraudulently reducing the amounts paid for cars deemed a total loss.
The lawsuit started in March 2022 and has grown to 33 plaintiffs, representing 32 states, alleging the Illinois-based insurer improperly applied so-called “typical-negotiation adjustment” policies to policyholders in line for total loss payments. In addition to seeking certification of a nationwide class, the group wants a judge to find State Farm liable for violating laws of 47 states and Washington, D.C.
“To determine the actual cash values of plaintiffs’ vehicles, State Farm used Autosource Market-Driven Valuation, a system which aggregated prices from online sales and listings of comparable vehicles,” Kendall wrote. “Audatex, a Texas-based third-party vendor, provided Autosource to State Farm. At State Farm’s directive, Autosource applied a ‘typical-negotiation’ adjustment to the market-value price to decide its total-loss payments — an adjustment reflecting the average difference between the list price and a lower theoretical price that a dealer would accept. Actual negotiations did not factor into the typical-negotiation adjustment. Nor did State Farm consult with any dealers or consider that ‘no-haggle’ pricing predominates in the used-car market, especially online.”
The plaintiffs said their losses happened during a time when supply chain issues had driven up the price of used cars to or above list, while the typical State Farm adjustment took 4% to 11% off the prices of vehicles compared to their damaged cars.
Kendall noted a concurrent lawsuit, also in federal court in Chicago, raising similar claims, and “10 parallel cases against State Farm in other federal district courts.” Seven such cases have earlier filing dates and three are more recent. The parties disagreed over which of the other actions are duplicative, and Kendall asserted all 10 have substantial overlap. However, she rejected State Farm’s efforts to stay claims of some of the plaintiffs, disagreeing with the company’s arguments about efficiency and streamlining litigation.
The factors of convenience weighed against transferring the case out of Illinois, Kendall said, but in “the interests of justice” she severed six plaintiffs and sent their claims to federal disctric courts in Louisiana, Tennessee, South Carolina, Arkansas, Georgia and Ohio.
For some defendants, State Farm asked the court to compel appraisal of their vehicles, dismiss the claims or grant summary judgment. Kendall refused, saying the lawsuit’s claims go far beyond a dispute over cash value. The plaintiffs actually argued the clause dictating appraisal for cash value disputes is part of their larger challenge.
“Plaintiffs allege State Farm deceived insureds by failing to disclose its use of the typical-negotiation adjustment,” Kendall wrote. “Likewise, as to plaintiffs’ unjust-enrichment claims - alleging State Farm concealed its application of the typical-negotiation adjustment to ‘reduce its total-loss payments to insureds’ - the concealment allegation raises more than an actual-cash-value dispute.”
State Farm also sought to end claims under laws of states not represented in the group of plaintiffs, so-called “headless” claims. Kendall said State Farm’s position amounted to an attack on the adequacy of named plaintiffs’ to represent class members from other states, a debate she said is more pertinent for a motion to certify classes.
Plaintiffs are represented by attorneys Andrew J. Shamis, of Shamis & Gentile, of Miami; Scott Edelsberg and Christopher Gold, of Edelsberg Law, of Aventura, Florida; Christopher A. Seeger, Christopher L. Ayers and Scott A. George, of Seeger Weiss, of Ridgefield Park, New Jersey, and Philadelphia.
State Farm is represented by attorneys Joseph P. Carlasare, of Amundsen Davis, of Chicago; and Peter W. Herzog III and Eric L. Robertson, of Wheeler, Trigg O'Donnell, of St. Louis and Denver.