State Farm Systemically Underpays Total Loss Claims, Class Action Alleges

 State Farm Insurance Claims Class Action Lawsuit Overview: 

• Who: Insurance provider State Farm has been hit with a class action lawsuit alleging it breaches its contracts with drivers.
• What: Driver Joan St. Julian says the company violates the law by not paying out sales tax to drivers when reimbursing them the “actual cash value” for cars that have been deemed a total loss.
• Where: The lawsuit is for California drivers.

Insurance provider State Farm “systematically and uniformly underpaid” claims made by thousands of consumers who suffered the total loss of their vehicle, a new class action lawsuit alleges.

The lawsuit was filed in California by lead plaintiff Joan St. Julian, who alleges that State Farm has breached contracts and violated California law by not paying out sales tax to drivers when reimbursing them the “actual cash value” for their total loss claims.

According to the lawsuit, State Farm processed approximately 115,000 total loss claims during the class period and around 10 percent of those claims were not paid sales tax owed under a given policy. “Assuming an average vehicle value of $15,000 and a sales tax rate of 8.5 percent, the amount-in-controversy easily exceeds $10,000,000, exclusive of interest, costs, and attorney’s fees,” Julian alleges.

State Farm Allegedly Underpays Total Loss Claims

Julian had a 2010 Bentley Continental GTC Speed Turbo 4WD 2D Convertible insured with State Farm and, in March, she was involved in an accident.

Julian filed a claim for property damage and State Farm determined that the cost to repair or replace the damage was higher than the vehicle’s actual cash value. As such, State Farm determined that the vehicle was what a “total loss” and invoked its actual cash value limit on liability.

“Plaintiff does not contest State Farm’s determination of the amount of loss, nor that such amount was higher than ACV and constituted a “total loss”. Plaintiff accepts that State Farm is permitted to only pay ACV,” the claim reads.

State Farm determined that the adjusted value of the vehicle was $72,219.00. It added title transfer fees of $15, subtracted the deductible of $500, but did not include any amount for sales tax, the claim states.

State Farm then made a total payment of $71,734.

The applicable sales tax based on Julian’s residency was 10.25 percent, therefore the ACV sales tax owed as part of the insured vehicle was $7,402.45, Julian claims.

“In breach of its contract with Plaintiff, State Farm did not include any sales tax in making the ACV payment for Plaintiff’s total loss,” the claim reads.

“Even if State Farm owes the cost to repair or replace the vehicle and not ACV, such cost would necessarily include sales tax, and thus State Farm nevertheless breached the Policy.”

Julian wants to represent all California drivers who were not reimbursed sales tax after their State Farm-insured vehicle suffered a total loss. She is suing for breach of contract and seeks certification of the Class, damages, legal fees, interest, and a jury trial.

Have you had to make State Farm claims for a total loss car? Tell us about your experience in the comments section.

Julian is represented by Scott Edelsberg of Edelsberg Law, PA.

The State Farm Claims Class Action Lawsuit is Julian v. State Farm Mutual Automobile Insurance Company, Case No. 4:21-cv-07404 in the U.S. District Court Northern District of California.

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