California homeowners win class cert. in lawsuit over State Farm Insurance payouts

UPDATE:

• The class includes all individuals who, between March 1, 2019, and the present, were insured under a property policy issued in California by State Farm, received reduced ACV benefits for a covered loss to real or personal property, and were paid less than their applicable policy limits, the ruling said.
• A California federal judge has certified a class of nearly 200,000 homeowners alleging State Farm underpaid property insurance claims in violation of state insurance codes.
• U.S. District Judge William Orrick ruled that the common issue of calculating actual cash value, or ACV, for property policies met all class requirements.
• The class action alleges State Farm depreciated sales tax when calculating ACV, in violation of California Insurance Code Section 2051(b).

State Farm class action lawsuit overview: 

• Who: A California federal judge is to likely certify a class of nearly 200,000 homeowners in a lawsuit against State Farm.
• Why: The homeowners argue State Farm underpays property insurance claims by depreciating sales tax when calculating replacement costs.
• Where: The class action lawsuit is filed in California federal court. 

A California federal judge has reportedly indicated he will likely certify a class of nearly 200,000 homeowners arguing State Farm underpaid property insurance claims by depreciating sales tax when calculating replacement costs.

The judge ruled the legality of State Farm’s practice regarding sales tax depreciation — which reduces “actual cash value” benefits —  is a common issue that predominates in the complaint, reports Law360. 

The judge also noted how he previously sided with plaintiffs in a similar case from 2017, during which he says his ruled policy and a California insurance code prohibit an insurer from making deductions aside from ones for “physical depreciation,” when calculating actual cash value. 

State Farm, meanwhile, argued it properly calculated the “actual cash value” of the homeowners personal property, pursuant to the California Insurance Code.

The lead plaintiffs, married couple Dan Grout and Melissa Pitkin, filed a complaint to represent a California class of homeowners with a property insurance policy from State Farm.

Homeowner plaintiffs claim State Farm guilty of breach of contract

Counsel for State Farm reportedly argued there was not common evidence across the class to support class certification, due to alleged variances in policyholder data that would require class membership, liability and damages to undergo individualized review. 

Counsel for Grout and Pitkin, meanwhile, claimed State Farm does not deny that it applies depreciation to sales tax and that the company does so to anyone who makes a claim, making the complaint “perfectly suited for class certification,” reports Law360. 

The plaintiffs claim State Farm is guilty of breach of contract and breach of the implied covenant of good faith and fair dealing. 

In a case last year, State Farm agreed to pay $2.09 million to put an end to claims it underpaid claims in Washington state by excluding “diminished value” payments.

Have you received a cash value benefits payment from State Farm that was reduced due to depreciation of sales tax? Let us know in the comments.

The State Farm class action lawsuit is Pitkin et al. v. State Farm General Insurance Co. et al., Case No. 3:23-cv00924, in the U.S. District Court for the California Northern District, San Francisco.

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