Class Action Alleges American Family Mutual Insurance Applied Unlawful Reductions to Total Loss Claims

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A proposed class action alleges American Family Mutual Insurance Co. has “systematically reduce[d]” payments made to insureds for total loss claims by applying unlawful deductions to the value of comparable vehicles.

The lawsuit alleges that although American Family’s auto insurance policies and Ohio law require the insurer to pay a vehicle’s “actual cash value” in the event a covered vehicle is declared a total loss, the company has artificially reduced the value of these cash settlements by instructing its third-party valuation vendor to apply “deceptive and capricious” selling price adjustments to the list price of comparable cars.

This practice has allowed American Family to “skirt[] its straightforward contractual obligation” to pay for the “actual cost to purchase a comparable automobile” in the event of a total loss and instead pay insureds lower amounts than required by its policies and Ohio law, the case contests.

According to the lawsuit, the defendant uses third-party vendor AudaExplore to determine the “market value” of covered cars by comparing the list prices of comparable vehicles of a similar make, model, year and conditions. The suit alleges, however, that American Family instructs AudaExplore to apply an unlawful “selling price adjustment” to comparable vehicles’ market values to purportedly reflect that the cars’ selling price “may be substantially less than the asking price.”

American Family’s selling price adjustments are, according to the lawsuit, “arbitrary and unsupportable.” The suit alleges that the defendant applies a “blanket percentage reduction” to comparable vehicles’ selling prices “[w]ithout providing any supporting data or rationalization for this calculation whatsoever.” Per the case, these across-the-board reductions are “not typical” given most used car dealerships have banned price negotiation, and the few who haven’t do not negotiate the online prices that appear in AudaExplore’s valuation reports.

Moreover, the defendant’s selling price adjustments “cannot be a reflection of market realities” since they are based on national data and not data gathered from the relevant market, the suit alleges.

The lawsuit further claims that American Family, “for reasons unknown,” does not instruct AudaExplore to apply the selling price adjustments in every state in which it operates, and many other insurers who use the vendor allegedly do not require it to apply the reductions.

The case looks to represent Ohio citizens insured by the defendant who, “from the earliest allowable time” to the date of class certification, received a first-party total loss valuation and payment on an automobile total loss claim that included a selling price adjustment or similar reduction.

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