State Farm Applies ‘Baseless’ Rate Adjustments on Total Loss Vehicles, Says Class Action

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State Farm Total Loss Class Action Lawsuit Overview: 

• Who: A pair of consumers lodged a class action lawsuit against State Farm Mutual Automobile Insurance. 
• Why: The plaintiffs allege State Farm applies a baseless rate adjustment to the value of vehicles so it won’t have to pay as much following total loss claims.
• Where: The class action lawsuit was filed in Illinois federal court.

State Farm undervalues total loss vehicles in order to reduce the payment it has to make to drivers who file total loss claims, a new class action lawsuit alleges. 

Plaintiffs Maria Munoz and Sandra Smiling claim State Farm avoids its contractual obligation to pay consumers the cash value of their vehicles in cases of total loss by applying a “baseless flat rate adjustment.” 

Munoz and Smiling want to represent a nationwide Class of consumers and Illinois and North Carolina subclass of consumers who are insured by State Farm and given a “typical negotiation adjustment,” on a total loss vehicle claim. 

Third party vendors employed by State Farm determine the value of a vehicle following a total loss claim by evaluating the price of comparable vehicles in the relevant marketplace, according to the class action lawsuit. 

Total Loss Vehicle Claims Subject to Unexplained Reduction by State Farm

Plaintiffs allege, however, that State Farm instructs its third party vendors to apply “an arbitrary and baseless flat rate adjustment to the value of each “comparable vehicle,” called a “typical negotiation adjustment.” 

Munoz says State Farm applied a 4 percent “typical negotiation adjustment,” deduction on her 2020 Ford Escape after she made a total-loss claim on the vehicle. 

Smiling, meanwhile, claims State Farm applied a “typical negotiation adjustment,” of around 6 to 8 percent on her 2014 Nissan Altima. 

Munoz and Smiling claim State Farm provided no explanation for the adjustment or the company’s reasoning behind the value deduction. 

“To avoid full payment under its policies, Defendant has devised a blatant and unlawful scheme to reduce its total-loss payments to insureds, by use of a deceptive, arbitrary and baseless “typical negotiation adjustment,” states the class action lawsuit. 

Munoz and Smiling argue that State Farm is guilty of breach of contract, breach of covenant of good faith and fair dealing, unjust enrichment, and in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and North Carolina Unfair Trade Practices Act. 

The plaintiffs are demanding a jury trial and requesting relief in the form of actual, compensatory, statutory, and punitive damages, in addition to restitution for themselves and all Class Members. 

A similar class action lawsuit was filed against State Farm this month by a California consumer who alleges the company breaks the law by not including sales tax when reimbursing drivers for total loss vehicles. 

Were you given an adjusted rate by State Farm for the value of your vehicle following a total loss claim? Let us know in the comments! 

The plaintiffs are represented by Andrew J. Shamis of Shamis & Gentile, P.A. 

The State Farm Adjusted Rate Class Action Lawsuit is Munoz, et al. v. State Farm Mutual Automobile Insurance Company, Case No. 1:21-cv-05211, in the U.S. District Court for the Northern District of Illinois.

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