State Farm Faces Allegations of Undervaluing 37,000 Drivers Using an Opaque Total Loss Algorithm | Carscoops

      Drivers across the country are joining lawsuits after a jury determines that State Farm undervalued totaled car claims.

      An Arkansas jury concluded that State Farm shortchanged 37,000 drivers by using unjust valuation software. Lawsuits in at least 19 states may compel insurers to reevaluate their total-loss calculations.

      State Farm refutes any wrongdoing, claiming that customers have the option to dispute payouts with appraisals.

      Insurance companies can occasionally be a saving grace during difficult times. However, policyholders frequently express dissatisfaction with lengthy wait times, subpar customer service, and seemingly inadequate payouts. A recent jury ruling in Arkansas highlighted this issue for tens of thousands of State Farm customers, potentially creating nationwide repercussions.

      Rose Chadwick spearheaded the class action lawsuit after State Farm deemed her 2011 Hyundai a total loss. She initially believed the compensation was reasonable until discovering that State Farm utilized software that included 'haggling discounts.' Essentially, the system presumed that customers could negotiate a lower price from a dealership for a replacement car, despite the fact that used car dealers rarely allow for negotiation.

      Chadwick’s legal team contended that this practice consistently undervalued total-loss vehicles. The jury concurred, determining that she had been underpaid by approximately $600 on her car, which had a worth of $4,700. Ultimately, the verdict impacts over 37,000 policyholders in Arkansas, with lawyers now pursuing comparable cases in at least 19 additional states.

      State Farm's Response

      In response, State Farm maintains that it acted appropriately, though it has ceased using the contested software. "State Farm consistently aims to pay what we owe according to the policy terms to assist our customers in recovering from their losses," the company stated to CBS. They further mentioned that customers can dispute valuations by providing third-party appraisals or additional information to bolster their claims.

      The current dilemma is whether these claims should be handled individually or if broad class action lawsuits, like the one in Arkansas, can continue. Courts nationwide have been divided on this issue, leaving insurers, attorneys, and regulators in uncertainty. For Chadwick, however, the challenge wasn't solely about compensation. "That's what I pay them for, is to be fair with me," she remarked.

      Potential Industry Transformation

      With billions of dollars in payouts related to these valuation systems, the Arkansas ruling could prompt a surge in claims from drivers who believe their totaled cars were undervalued. If additional juries adopt the same rationale, insurers in the industry might have to reconsider how they assess the value of vehicles.