A proposed class of North Carolina drivers has accused State Farm of systematically manipulating vehicle valuation data to shortchange policyholders whose cars are declared total losses, alleging the practice violates the state’s total-loss regulation.
The federal lawsuit, filed in Raleigh, claims the insurer used third-party valuation software and hidden “adjustments” to reduce the actual cash value paid to customers whose vehicles were totaled after crashes. The plaintiffs argue that these tactics allowed the company to save millions of dollars at the expense of policyholders entitled to full market value under North Carolina law.
According to the complaint, State Farm applied a so-called “typical negotiation adjustment,” a blanket discount subtracted from vehicle valuations on the assumption that replacement-vehicle dealers would negotiate prices downward. Plaintiffs say this deduction has no basis in real-world transactions and was designed solely to lower payouts across the board.
The lawsuit also contends that State Farm relied on opaque vendor software that generates comparable vehicle data and then imposed further internal reductions before issuing settlement offers. The plaintiffs claim that consumers were never told these adjustments were being made and had no meaningful way to verify or challenge the insurer’s math.
State Farm has defended similar practices in other states, arguing that its valuation tools are industry standard and that total-loss settlements must be determined individually based on a car’s condition, mileage, and local market. The company has not yet responded publicly to the North Carolina allegations.
The North Carolina case is part of a growing wave of litigation accusing major insurers of undervaluing totaled vehicles through automated systems and undisclosed deductions. In several other states, juries have already ruled that similar valuation methods violated consumer-protection laws and shortchanged policyholders.
Legal experts say the outcome in North Carolina could depend on several key questions: whether State Farm’s approach represents a uniform company policy suitable for class-action treatment; how state regulators interpret “actual cash value” under the total-loss rule; and whether the insurer’s adjustments can be proven to have caused measurable financial harm to each driver.
Another major issue is transparency. Plaintiffs argue that policyholders have a right to know how their settlement values are calculated and to receive documentation showing comparable vehicles used in those valuations. If the court agrees that State Farm concealed critical information, the case could expand beyond breach-of-contract claims into potential violations of North Carolina’s unfair and deceptive trade practices laws.
If the plaintiffs prevail, the lawsuit could force State Farm to change how it calculates vehicle values in North Carolina and reimburse thousands of policyholders for alleged underpayments. Beyond any financial penalties, a judgment against the company could prompt regulators in other states to review total-loss valuation standards and insurer software practices.
For consumers, the case serves as a reminder to examine every total-loss offer carefully. Policyholders can request detailed valuation reports and comparables, question unexplained deductions, and seek an independent appraisal if a settlement appears low.
The suit reflects growing scrutiny of how insurance companies use data analytics and proprietary software to shape claim payouts. As courts weigh whether these systems comply with consumer-protection laws, the North Carolina case could become a key test of how far insurers can go in using algorithms to determine what a car is “really” worth after a crash.
See our original story here:
Legal File: State Farm Underpaying For Totaled Cars →