I’ve told you for years that there is a good chance insurance companies are going to lowball you on your car’s value if it gets totaled or stolen and not recovered. This is why I wrote the article on my FAQ page about dealing with an insurance adjuster. As you might imagine, I found this legal case extremely interesting and frankly, satisfying. Let’s hope this is just the start.
An Arkansas jury has delivered what many would call a surprise verdict: hundreds of millions in potential underpayments by a major auto insurer. The case began when Rose Chadwick, whose 2011 Hyundai was declared a total loss, realized her settlement didn’t cover replacement costs—so she took the insurer to court. The jury sided with her and an estimated 37,000 policyholders, finding that the technology used to value totaled cars included an unfair “haggling discount,” resulting in systematically low settlements.
The crux of the case centered on the software State Farm used to determine actual cash value for total-loss vehicles. That program factored in what it assumed a buyer could negotiate off a used-car price—effectively lowering the payout. Chadwick’s lawyers argued that in today’s tight used-car market, dealers rarely negotiate—and so customers were shortchanged. The jury agreed, awarding her roughly $600 more for a car valued at about $4,700. Not a huge payout for Rose, but the implications are much more far-reaching.
State Farm says the calculation model was industry-standard and the company no longer uses it. In its statement, the insurer emphasized its goal to settle claims fairly, noting additional evidence from policyholders is welcomed, and third-party appraisals are an option. Still, State Farm is fighting the verdict, arguing that each claim is unique and that class-action status is inappropriate—a legal split growing more common in courts nationwide.
The software in question was deployed by many insurance carriers—not just State Farm—adding fuel to pending lawsuits in at least 19 states, all based on the same shortchanging calculations. Regulators are beginning to weigh in: some courts have accepted these as class actions, while others require each claim to be handled on its own.
Not brought out in this trial, but you can bet it will be in the future, is dealers have software now to tell them what a car will sell for, based on historical data. Many dealers take that as the gospel and stand firmly on that price. I’ve seen dealer that priced a car at a loss right off the bat because the predictive software said it would sell for less than they owned it for.
In Arkansas, this verdict has ripple effects. It sets a precedent for class-action lawsuits challenging valuation methods in total-loss cases. Attorneys for Chadwick argue that this isn’t just about one car—it’s about a flawed system that could have undercut tens of thousands of drivers.
If the case progresses as a class action, the financial implications for insurers could be significant. Total-loss payments account for a substantial portion of claims payouts, and if most insurers relied on similar valuation practices, customers nationally could have been shorted by hundreds of dollars—or more—on each claim.
For the consumer, the lesson is simple: don’t take the first offer at face value. If your vehicle is totaled, it’s worth pushing back. Insurers have processes in place to appeal, and in some cases, class-action leverage may make negotiating more effective. Use the process I laid out in my FAQ article to prove your case.
The legal squabble isn’t confined to Arkansas. As State Farm appeals—arguing the case should be handled individually—the question is whether a single software practice applied across thousands of claims still qualifies for collective challenge. And the stakes go beyond payout amounts: it’s about how insurers calculate “actual cash value” and whether today’s drivers are getting what they paid for. I see evidence often that they do not.