Lawsuit Alleges Progressive Applies Unlawful Deductions to Total Loss Settlement Values in Georgia [UPDATE]

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Progressive Mountain Insurance Company and Mitchell International, Inc. face a proposed class action over their alleged practice of applying “arbitrary and unexplained” projected sold adjustments to the values of vehicles declared to be a total loss.

According to the case, Progressive and Mitchell’s “projected sold adjustments” are unsupported by verifiable data and have the effect of undervaluing insureds’ total loss claims to Progressive’s benefit. The lawsuit claims the practice violates Georgia law, which requires insurers to pay a cash equivalent settlement for totaled vehicles based on the “actual cost” to purchase a comparable vehicle, not a “guess” as to how much a vehicle may be sold for “at some point in the future.”

Per the filing, the defendants’ conduct is not merely a “random or isolated” event but part of a “systematic and uniform protocol followed when total loss claims are settled and paid in the State of Georgia.”

The lawsuit states that when a vehicle covered by a Progressive insurance policy is damaged, Progressive may declare the car a “total loss” and pay the insured a cash settlement based on the cost of purchasing a comparable vehicle. To determine this amount, Progressive contracts with Mitchell to provide vehicle valuation reports that are purportedly based on the cost of comparable vehicles offered for sale in the relevant market, the case relays.

The lawsuit alleges, however, that Mitchell applies a deduction labeled as a “Projected Sold Adjustment” to the list price of comparable vehicles used to determine the value of a totaled car. Per the case, the only explanation offered for the deduction is “buried on the last page of the report” and notes that the adjustment is meant to “reflect consumer purchasing behavior (negotiating a different price than the listed price).”

The case claims the defendants’ projected sold adjustments are “illusory, unsupported, wholly arbitrary, and utilized by Progressive and Mitchell simply to save Progressive dollars in the settlement of first-party total loss claims.” According to the filing, the deductions are unsupported by data as neither Progressive nor Mitchell has any information about the condition of vehicles listed for sale online, the dealers’ willingness to negotiate online prices or the insured’s negotiation abilities. Moreover, the vehicles utilized in Mitchell’s reports are often found on internet-based listings, the suit adds. Because the used car market “relies heavily” on the internet and the availability of immediate comparison shopping, vehicles listed for sale online are typically priced to market, meaning it would be “uncommon or atypical” for a deduction as high as the defendants’ projected sold adjustments to be taken from the online list prices, the lawsuit argues.

All told, the suit says Progressive and Mitchell are “simply guessing, with no supporting or verifiable data,” what price a comparable vehicle may sell for in the future. Per the case, Georgia law does not allow for insurers to “guess, speculate, or ‘project’” a comparable car’s selling price “at some point in the future,” and insurers must base their total loss settlements on the “actual cost” to purchase a comparable vehicle, the suit says.

The lawsuit alleges the defendants’ projected sold adjustments artificially reduce the value of insureds’ vehicles to the benefit of Progressive and at the expense of consumers. According to the suit, “nothing in the Plaintiff’s policy or Georgia law allows such a deduction.”

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