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Progressive reaches $48M class action actual cash value settlement

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Insurance | Legal
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Progressive has agreed to settle a class action total loss underpayment lawsuit for $48 million.

The complaint was filed in July 2021, and later amended, in Southern New York District Court. The plaintiffs allege Progressive breached the provision of their insurance contract that states actual cash value (ACV) “is determined by the market value, age, and condition” of a vehicle at the time of loss by applying Projected Sold Adjustments (PSA).

The suit claims Progressive “systemically thumbs the scale” against claimants by applying PSAs that reduce the base values of comparable vehicles that are used to calculate the ACV of claimants’ total loss vehicles.

“This reduction is contrary to appraisal standards and methodologies and is not based in fact, as it is contrary to the used car industry’s market pricing and inventory management practices,” the suit states. “The adjustment is applied to each of the comparable vehicles on top of adjustments for differences such as mileage, options, and equipment. The only purported explanation for the downward adjustment appears on the last page of the valuation reports and is a general, nondescript statement claiming that the reduction is to ‘reflect consumer purchasing behavior (negotiating a different price than the listed price).'”

“Progressive’s use of the PSA was deceptive or misleading under N.Y. Gen. Bus. Law § 349(a) because Progressive misled plaintiffs and similarly situated claimants by representing that the PSA reflects actual consumer purchasing behavior of negotiating discounts off of list price in cash transactions,” case documents state.

While the alleged behavior of Progressive may seem like an unfair claims settlement practice, New York doesn’t allow insurance companies to be sued directly for unfair claims practices. Instead, that’s left to the Department of Insurance.

This suit alleges Progressive violated New York General Business Law § 349, a statute that does allow a private right of action (where an individual or business can file suit) and has been used by body shops in the past to file suits against insurers.

The suit was later consolidated with another similar suit. The class includes any New York resident who filed a claim with Progressive from July 28, 2015 through March 16, 2023 (when class certification was granted) and who received compensation for a totaled vehicle based on an “Instant Report” prepared by Mitchell International and the ACV was decreased based on PSAs.

According to the preliminary settlement agreement, the amount agreed on is “an excellent result and represents a recovery of 70% of compensatory damages.” The plaintiffs’ attorneys have requested that each of the seven class representatives be given a service award not to exceed $15,000. The agreement, if approved, would disperse up to about $16.7 million in administrative, litigation, and attorney costs.

“The settlement was made possible only through years of hard-fought litigation against a Fortune 100 company and settled only on the eve of trial,” the document states. “Progressive mounted a vigorous defense at each step of this action, requiring plaintiffs to (i) defeat defendants’ motion to dismiss, (ii) achieve contested class certification, which included consultation of reports and testimony from experts in the fields of the automotive industry, statistics, and appraisal profession, (iii) fend off Progressive’s petition for interlocutory review of the class certification order, (iv) defeat Progressive’s motion for summary judgment; (v) defeat Progressive’s motions to exclude their expert witnesses, and (vi) engage in significant pre-trial preparations and proceedings…”

The trial was scheduled to begin in less than a month when the parties started “extensive” mediation efforts.

Responses to the proposed agreement are due to the court by July 31. A status conference is scheduled for Aug. 14.

A similar lawsuit filed in 2016 against GEICO was thrown out by the New York Eastern District Court in February.

The class action suit went back and forth from district to appeals courts over the alleged undervalued ACV of a total loss vehicle, which eventually came down to either MSRP, as argued by the plaintiff, or GEICO’s argument for what it believes to be the “reasonable purchase price” under state law.

The case was stayed in August 2023 pending the decision of an appeals court on GEICO’s appeal of breach of contract and consumer protection violations.

A court document filed in January states the parties hadn’t been able to agree on a date for oral argument. The last update on the case only states that it was terminated.


Featured image credit: Progressive 

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