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State Farm ordered to pay more than $288K for reducing total loss payout

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Insurance | Legal
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A Texas man who sued State Farm insurance for deducting money from his total loss settlement was awarded $288,517.59 by a jury earlier this month.

Joseph Wayne Collins took civil action against the company after his 2009 Toyota Tacoma, which was insured by State Farm, was damaged in an April 24, 2020 hail storm, according to a court filing.

Although Collins wanted his pickup repaired, and State Farm initially agreed, they later deemed it a total loss and agreed to pay him $17,150.01, from which $1,751.96 was “fraudulently deducted,” a court document says.

The court heard that the funds were deducted to cover pre-repair work completed during a short window when State Farm had deemed the vehicle repairable. After it received the repair estimate it declared the vehicle a total loss and paid the repair shop for its work, only to deduct those fees from Collins’ settlement, the jury heard.

According to the lawsuit, State Farm acted in bad faith by:

    • “Intentionally and maliciously withholding from Plaintiff’s agreed settlement under the policy the sum of $1,751.96;
    • “Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of the collision claim under the policy in question;
    • “Refusing to repair [Collins’] insured vehicle in accordance with the terms of the policy; and
    • “Using false and misleading information and by using a weaponized valuation tool to intentionally undervalue and under-indemnify [Collins]”.

The lawsuit said that State Farm ultimately determined the truck’s cash value — including tax, title, and license — to be $17,200.01 and later said it would pay Collins $17,150.01 after subtracting $50 for the deductible.

It’s worth noting that State Farm initially offered Collins $13,450 for the truck but agreed to pay him $16,000 plus taxes after Collins hired appraiser Robert McDorman to conduct a third-party appraisal, which determined the vehicle’s value to be higher.

Collins said State Farm subtracted $1,751.96 from his payout, leaving him with $15,398.05. The lawsuit indicated that State Farm refused to write Collins a check for the money it deducted, despite requests to do so.

Collins took the matter to court after failing to reason with State Farm, the court claim said, adding he was suing for the remainder of his entitled settlement, the cost of replacing a vehicle that he believes should have been repaired, and mental anguish.

“In particular, the Plaintiff suffered intense feelings of humiliation and belittlement, an abnormal sense of inferiority and accompanying panic attacks, and loss of sleep and appetite, all of which commenced on damages of up to three times the amount of economic damages as permitted by the Deceptive Trade Practices — Consumer Protection Act and the provisions of the Texas Insurance Code,” the lawsuit said.

State Farm did not respond to a Repairer Driven News request for comment.

The jury found that State Farm failed to comply with the legal agreement, wrongly deducted money from his settlement, engaged in unfair or deceptive acts or practices intentionally and failed to pay Collins within a 60-day deadline.

The amount awarded by the jury included:

    • $175,487.50 in actual damages because State Farm’s actions were conducted “knowingly and intentionally;”
    • $108,785 in legal fees;
    • $1,751.96 to compensate Collins for the settlement shortfall;
    • $893.13 for having to secure alternate transportation; and
    • $1,600 for the time Collins spent trying to resolve the issue.

Collins initially brought his Tacoma to Burl’s Collision Center in Henderson, Texas to have it repaired. The shop owner Burl Richards, who was a witness during the trial, said State Farm initially agreed to repair the truck before deciding to declare it a total loss.

Richards said State Farm later sold the truck at an auction with a clear vehicle.

He also said the money deducted from Collins’ settlement was for a number of charges State Farm had previously reimbursed Burl’s Collision for, including a blueprint fee.

The jury found the shop’s fees to be justified in what Richards described as a “victory for our industry here in Texas.”

McDorman, who also testified during the trial, told RDN that he hopes the judgement sends a message to State Farm.

“Texas doesn’t appreciate being cheated and under-indemnified,” he said. “These [types of cases] are becoming a systematic problem across the United States.”


Featured image credit: iStock/alfexe

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