State Farm Faces North Carolina Class Action Over Total Loss Valuation Practices

When Valuation Meets Regulation: The Implications of the New State Farm Mutual Automobile Insurance Company Class Action for the Insurance Industry

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In the world of property-casualty insurance, how we value a total loss vehicle is as critical as how we price premiums. A newly filed class action in North Carolina has turned a spotlight on that valuation process and raised red-flags for insurers about compliance, transparency, and trust. The case brings together technology-driven models, state regulation, and industry practice.

What’s Going On?

In North Carolina, policyholder Craig Brewer has launched a class action against State Farm claiming that the company systematically undervalued total-loss claims by reducing the retail cost of comparable vehicles used in calculating settlement amounts. According to the complaint:

• State Farm purportedly used a valuation tool (the CCC One Market Valuation Report) to set the base value of a vehicle that was declared a total loss. (Lawyer Monthly)

• It is alleged the insurer then applied an automated “condition adjustment” or “blanket reduction” to the retail cost of each comparable vehicle, reducing total-loss payout amounts by 4 – 9%, and in Brewer’s instance by approx. 5.5%. (Repairer Driven News)

• The suit contends that this practice conflicts with North Carolina’s motor-vehicle total-loss regulation, which allows insurers to adjust for the condition of the totaled vehicle—but not to reduce the retail price of the comparables used to determine value. (Lawyer Monthly)

• The legal claims include breach of contract and violations of the North Carolina Unfair and Deceptive Trade Practices Act. (Top Class Actions)

In short, the insurance industry now faces a detailed scrutiny of the assumptions, algorithmic adjustments, and vendor tools used in actual cash value (ACV) calculations.

Why This Matters for Insurers

For industry stakeholders, this case embodies several intersecting issues:

1. Regulatory exposure – State regulation often ties total-loss settlement methods to local law. Deviations or non-disclosure of adjustments can trigger unfair-trade-practice or bad-faith claims. (See Tennessee example where a Sixth Circuit panel let a class action proceed against State Farm for its use of a “Typical Negotiation Adjustment” (TNA).) (Insurance Business)

2. Automation and vendor-model risk – The use of automated valuation tools and external vendor data (such as CCC One, Audatex, or Autosource) raises questions about transparency, human oversight, dataset integrity and whether any “deductions” built into the model reflect real world economics or are simply cost-saving adjustments. (Seeger Weiss LLP)

3. Class-action vulnerability – The case isn’t isolated. Insurers in multiple jurisdictions (Alaska, Illinois, Kentucky, Mississippi, Tennessee, West Virginia and more) have seen similar claims tied to total-loss valuations. Some states have dismissed cases due to law or class-action issues; others remain very much active. (Edgar Index)

4. Financial and reputational consequences – Even a few-percent undervaluation per claim can aggregate to substantial risk. More importantly, a regulatory or judicial finding that the model or practice is unfair could prompt policy changes, create back-pay scenarios, or encourage similar suits in other states.

5. Best practice and transparency – The broader lesson: policyholders and regulators want clarity around how ACV is calculated, including the role of vendor data, adjustments for condition, mileage, and market trend, and disclosure of assumptions made.

“Rather than using the retail cost of comparable vehicles as required, State Farm reduced their price using an automated CCC One function … This deduction violates North Carolina law.” – From the Complaint in Brewer v. State Farm (Repairer Driven News)

Key Questions for Insurers to Review

Here’s a short checklist companies and claims teams should use to ensure their total-loss valuation practices stand up to scrutiny:

• Are all “adjustments” to comparable-vehicle retail values (such as condition, negotiation‐assumption, or geographic factors) explicitly permitted under the relevant state total‐loss regulation or policy language?

• Can you document how vendor data is used, and how any automated deductions or “blanket” adjustments are justified by actual market behavior?

• Are your current practices consistent across policyholders in a given jurisdiction (to avoid the appearance of uniform “discounts” that may not reflect condition or mileage)?

• Is the policyholder clearly informed about how their vehicle’s value was determined, including the comparables used, the adjustment factors applied, and their right to request an appraisal?

• Has your company considered audit-reviewing past total-loss settlements to check for any systematic undervaluation or variation that might invite class-action scrutiny?

A Glimpse at the Legal Landscape

Here is a simplified table summarizing recent developments across key states:

These cases highlight the trend: courts and regulators are increasingly willing to question whether insurers’ valuation models reflect real market conditions or simply serve as internal “discounting” mechanisms.

What Should Insurance Industry Professionals Do?

As practitioners in the insurance space—whether on the claims side, underwriting, legal, or compliance—this class action should serve as a signalling event. In our community, the key to maintaining trust and avoiding regulatory exposure is maintaining practices that are reasonable, transparent, and defensible.

If your organisation uses vendor-based valuation models (or internal algorithms) for total loss claims, now is the time to:

• Review how those models apply adjustments and whether the logic aligns with local law;

• Ensure claims-teams are trained on how the policy and the Valuation Report methods intersect with state statute;

• Evaluate past settlements for consistency and whether any “blanket” deductions exist that might invite challenge;

• Engage with your vendor partners to obtain detailed documentation of how their platforms derive values, what discounting or “negotiation adjustments” they include, and whether you are replicating them without validation;

• Consider proactively updating policyholder communications to explain how total-loss value is determined in non-technical language.

Final Thoughts

The Brewer case against State Farm is more than a single lawsuit. It signals heightened regulatory attention and raises a broader question: when claims valuation incorporates automated tools and internal adjustments, how do we ensure those processes uphold fairness, transparency and the contractual promise we’ve made to insureds?

For insurers, the takeaway is clear: deployment of vendor tools or algorithmic models does not relieve responsibility. Ensuring that each deduction or adjustment is supported by data, compliant with law, and communicated to policyholders is critical. This case may ultimately reshape how we approach total-loss valuations and how comfortably our industry leans on automation.

In an era where algorithms drive more of our decision-making, keeping the human commitment to fairness at the centre remains essential.