Two Georgia plaintiffs are asking a federal judge to reconsider his denial of sophistication action certification to more than 600,000 State Farm insurance policy holders over exactly what the two say are years of lowball diminished value settlements.
In their civil suit against State Farm Mutual Automobile Insurance Co. within the U.S. District Court for that Middle District of Georgia, Rashad Baker and Zelma Stovall argue that the formula accustomed to determine diminished value within their cases is flawed, and resulted in a too-small settlement.
Arguing that every one of the thousands of other claimants like them was also a victim of the same flawed formula, they asked Judge Clay D. Land to certify their case like a class action law suit, and to include “All persons issued a Georgia vehicle insurance plan by State Farm who — according to loss dates between December 7, 2022, and also the date of certification [of class action lawsuit status] — made physical damage claims under their policies ….”
Land, in a Sept. 2 ruling, found that the plaintiffs hadn't proven their “bold assessment that the formula underestimates diminished value every time” [emphasis Land’s], and noted that, in the plaintiffs’ case, the remedy was a jury trial to find out to weigh their specific claims — not really a broad solution that would affect everyone inside a certified class.
“In summary, Plaintiffs have not established that [State Farm’s] formula is wrong for those claims over the spectrum of vehicle makes, model years, mileage, severity levels, and repair costs. Thus, they haven't yet indicated that every putative class member was injured by use of [State Farm’s] formula. Uninjured plaintiffs, of course, don't have standing to bring an action,” Land wrote.
Generally, diminished value is the distinction between the value of the vehicle if there had not been damage, and its value after repairs happen to be completed.
The case centers around a 20-year-old ruling in State Farm Mutual Insurance Co. v. Mabry, which established how State Farm would be to calculate diminished value because of its Georgia customers. Finding that State Farm had no appropriate methodology for calculating DV, the trial court gave State Farm several options, including something called the “17 formula” used by other major insurers operating in Georgia. State Farm adopted 17 , and, as Land noted, is still bound to use the formula today, threatened by of contempt.
In his ruling, Land offers this description of how State Farm employs 17 :
If the claimant disputes the DV assessment, the claim is used in a special unit that double-checks to ensure the formula was applied correctly, and invites the claimant to present evidence concerning the DV.
Baker and Stovall, the plaintiffs, hired appraisers to conduct DV appraisals, and “both appraisers opined that the diminished value was significantly more compared to value State Farm calculated using the 17 formula,” Land wrote in the order. State Farm, he added, hired its very own expert, who found the same thing, he added.
“Plaintiffs assert breach of contract claims, contending the 17 formula is flawed which consequently Plaintiffs and similarly situated insureds weren't fully paid for diminished value,” Land wrote. Yet, he added, the plaintiffs “recognize that calculating damage utilizing a traditional approach, such as case-by-case diminished value appraisals such as the ones Plaintiffs commissioned, would result in individual issues predominating over common issues making class certification inappropriate.”
For that reason, he said, the plaintiffs have asked the court to “require State Farm to reassess diminished value utilizing a new formula which has not developed but could be formulated after additional discovery.”
Baker and Stovall depend on the expert opinion of Richard Hixenbaugh, a skilled vehicle appraiser who contends that State Farm’s use of 17 results in under-assessment of diminished value 100% of the time. Hixenbaugh pointed to 3 flaws within the formula: DV is capped at 10% of a vehicle’s pre-loss value, though DV losses can run up to 25%; mileage is double-counted, in estimating pre-loss value and again included in the mileage modifier; and vehicles over a certain mileage — either 100,000 or 150,000, depending on the vehicle — are incorrectly assumed to possess no retail sale value.
Hixenbaugh analyzed 51 State Farm DV cases, by which he was hired to help challenge the insurer’s assessment. In each case, he found, an appraiser’s figure exceeded the 17 assessment.
Land was critical of Hixenbaugh’s findings, agreeing with an assertion by State Farm’s expert, Michael Salve, the sample size was too small, and wasn't associated with a cross-section from the insurer’s DV cases.
According to Land, Salve discovered that the typical repair value for a claim in Hixenbaugh’s sample was $11,866, versus $4,442 for that proposed class, which his sample over-represented low-mileage, late-model, premium vehicles. For those reasons, Salve argued, Hixenbaugh’s analysis “cannot be relied upon for that purposes of extrapolating to the claims associated with the alleged class as a whole.”
In their motion for reconsideration, filed Sept. 14, Baker and Stovall, accompanied by Rachael Leonard, asserted Land had misunderstood their claim, and was under a wrong impression about Hixenbaugh’s expert opinions.
They said their suit was based this is not on State Farm’s failure to “pay” DV, but “solely on State Farm’s breach from the duty to evaluate for DV,” which, they said, made their claim relevant.
“[D]ifferent common evidence is relevant to a failure to assess,” they argue. “Indeed, Plaintiffs do not need to show that 17 invariably resulted in an underpayment of DV, but rather the formula am inherently flawed that the very application of it was a breach of the duty to evaluate.”
“Indeed,” they wrote, “when confronted with a failure to evaluate claim — instead of a failure to pay for claim — it is not required to prove that DV exists” . “There is substantial common evidence in the record that the 17 formula is so inherently flawed it constitutes a breach from the duty to assess.”
Baker, Stovall and Leonard noted that experts hired by State Farm “found DV was $0 in less than 1% of the cases, while 17 assessed DV at 0% more than 50% of the time…. Meanwhile, the typical DV loss appraised by experts was $3,237, while State Farm paid typically $190” .
Addressing Hixenbaugh’s opinions, the plaintiffs contend the appraiser’s words were based not just around the sample cases he provided, but on “his own experience appraising a large number of varied vehicles for DV , including ‘just about any brand name,’ ‘newer, more valuable vehicles or vehicles that have incurred significant repair damage or both,’ as well as ‘older, less expensive vehicles or vehicles with minor damage.'”
“The court acknowledged the issues in the 17 formula but concluded they didn't impact all proposed class members,” the plaintiffs write. “Plaintiffs respectfully disagree but, at the minimum, a legal court should allow Plaintiffs to renew their motion with a narrowed class definition to ensure those injured through the formula can obtain the good faith assessment they expected.”
