Insurance companies accused of ‘lowballing’ car owners

Alameda County District Attorney Pamela Price, California District Attorney

Time for everyone to take a look at their policies…

A California prosecutor is suing major auto insurers, including Progressive and the United Services Automobile Association (USAA), for allegedly colluding to undervalue “totaled” vehicles.

In a lawsuit announced May 9, Alameda County District Attorney Pamela Price accused the insurance giants and their affiliated software developers of using appraisal software to systematically undervalue “totaled” vehicles and pay car owners less than the actual value owed under their policies is.

Price claims the lawsuit violates several state laws and is seeking civil penalties, restitution for California drivers, injunctive relief and associated fees and costs. “Many residents live paycheck to paycheck and go deep into debt just to buy a car,” Price said. “If an insurance company underpays its customers for a totaled vehicle, it can lead to job losses and even homelessness.”

The lengthy complaint, filed April 26, alleges that auto insurance companies such as the Progressive Corporation, USAA and subsidiaries “owe duties of good faith and fair dealing to hundreds of thousands of California residents and businesses each year.”

According to patch, the lawsuit points the finger at software developers who worked with the insurance companies to manipulate and reduce the “actual cash value” of totaled vehicles. This arrangement allowed customers to make “lowball” settlement offers. Then, prosecutors allege, the companies would resell the vehicle at auction to minimize losses after the policyholder agreed to the low bid.

The DA’s office believes the alleged scheme affects all California drivers, but specifically targets seniors and veterans. Business owners are also affected, including automakers and dealers, as insurance companies “systematically lowered the market value of their vehicles”; gap insurance providers, whose ‘gap insurance’ policies must compensate the difference between the outstanding loan amounts and the understated amount paid; and car loans, when distressed car owners are no longer able to pay their car loans.

Finally, the complaint states that auto mechanic shops are affected because companies may miss out on repairs after vehicles are “systematically” totaled instead of repaired. “Public safety involves protecting consumers from powerful corporations that seek only to maximize profit,” Price said.

“We are trying to level the playing field for car owners who face what appears to be a rigged game when their car or truck is totaled, because the loss of a vehicle can destabilize someone’s life.”

Price’s office is looking for anyone who believes they are a victim of an insurer undervaluing their vehicle, and is asking them to fill out a consumer fraud complaint form.

RELATED CONTENT: Myths and reality about car insurance