A lawsuit filed in Texas against USAA will move ahead like a class-action case with respect to a large number of policyholders whose vehicles were allegedly deemed total losses without their consent and, as a result, their registrations were revoked and also the vehicles known as salvage, or non-repairable, by the state.
While the situation might have obvious value to consumers, it’s also relevant to repairers as it could mean more vehicles to become repaired instead of salvaged.
The suit stems from a 2009 wreck Sunny Letot was involved in having a USAA policyholder who Letot claims accounts for the collision. Before filing suit, Letot tried to have her 1983 Mercedes Benz 300SD repaired. She argued it's repairable and was more vital because she had been restoring it and was nearly finished.
A USAA employee used CCC Valuescope to look at the worth of the vehicle at $2,728 and that repairing it would cost $8,859 therefore it was deemed an overall total loss, according to the suit. Letot disputed the payout and demanded $10,700 for damages. She then learned that USAA had filed the owner retained report using the Texas Department of transportation 2 days after she refused to accept its valuation of her car and something next day of the checks were tendered by USAA, according to the lawsuit. The report tells the state the vehicle was deemed a total loss, was kept through the owner, and will need a salvage title.
Letot asked USAA to allow the DOT know her vehicle was not salvaged. USAA took no action until almost two years later once they asked the DOT when the owner retained report might be corrected “to show that the cost of repairing Letot’s vehicle did not exceed its value in order to take away the ‘total loss’ status,” based on the suit.
The trial court and also the Court of Appeals for the Fifth District of Texas at Dallas initially ruled in support of USAA, but in 2022 the appellate court vacated part of its opinion relating to alleged violations of the state’s insurance code and Letot’s contract with USAA in addition to conversion – that USAA took ownership of Letot’s vehicle without her consent, then remanded the case to District Court for trial. The District Court granted class certification, that the Court of Appeals affirmed on Feb. 10.
“Discovery later revealed that the procedure USAA used to handle Letot's claim was routine at USAA,” the opinion states. “USAA's procedure ended up being to file the owner retained reports immediately after it issued check to claimant, whether or not the claimant was given an opportunity to accept the check or whether the check being mailed. Discovery also says USAA files eighty to one hundred owner
retained reports each week.”
Letot’s attorney, Jeffrey Tillotson, told Repairer Driven News on Thursday the opinion was the “last hurdle” that had to be cleared prior to the case may go to trial.
“We’re anxious and eager to proceed,” he said. “They [USAA] just sent people checks for low-dollar amounts without people understanding or knowing what really was happening. This example is all about addressing that practice and forcing USAA to adhere to what the law states and ensuring that anyone who’s coping with USAA understands what they’re attempting to do.”
Robert Owen, among the attorneys representing USAA in the case, told RDN that, “USAA continues to examine a legal court of Appeals’ opinion and it is considering its further appellate options.”
USAA appealed the trial court’s class certification to the Fifth District Court on several arguments including it abused its discretion by certifying an “unascertainable and overly broad” class of members including the ones that “lack standing.” The category fails to meet the numerosity, commonality, and typicality requirements and lacks an injunctive relief claim, according to USAA. USAA also disagreed with Letot being named the category representative and contends she didn't prove that class action lawsuit benefits outweigh the detriments.
The Court of Appeals overruled all the issues USAA presented in the opinion issued last week.
“Once we have explained, the focus isn't on determining whether a vehicle was an actual salvage vehicle but rather on the timing of USAA filing an owner retained report. … At trial, Letot applied for evidence, without objection, nearly 2,000 owner retained reports filed by ‘USAA’ showing a date of filing three days or less in the ‘Date of Claim Payment.’ Thus, the record shows that class members are clearly ascertainable.”
Auto Claim Specialists Md Robert McDorman said the practice is typical with all insurance companies, including USAA.
“It’s something that they use to penalize the insured and claimants,” he explained. “They will use this like a weapon to force these to enter settlements.”
McDorman provided two USAA total loss examples he helped resolve by having his clients invoke the appraisal clause. Third-party appraisers, one hired by USAA and the other by the policyholders, on claims agreed that vehicles were undervalued by thousands – a 2006 Jeep Wrangler by $5,967, or 44%, and a 2022 Volkswagen Beetle by $2,346, or 16%. McDorman said both fought USAA’s total loss determinations and weren’t paid attention to so they invoked the appraisal clause and were able to have their car repairs paid for by USAA.
USAA’s policy, under limit of liability, he added, will deem an automobile a total loss if the repair cost plus the salvage value is larger compared to cash value.
“But what goes on here is, such as the petition says, once they begin using these data providers for example CCC One, Audatex, and Mitchell, they don’t actually define the particular cash value. They use an intricate algorithm that always favors the carrier. …If they would’ve defined the particular cash value, this issue wouldn’t have happened.”
