Lawsuit Claims State Farm Underpays Claimants’ Medical Expenses Due to Unlawful Policy

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A proposed class action challenges State Farm Mutual Automobile Insurance Company’s apparent practice of only paying twice as much as Medicare would pay for insureds’ medical expenses instead of valuing them in accordance with Arkansas law.

According to the first amended complaint, the effect of State Farm’s practice is to underpay policyholders’ uninsured and underinsured motorist coverage claims in violation of its contracts with its Arkansas customers.

“Based on good faith knowledge and belief, State Farm’s practice of discounting reasonable medical expenses by refusing to pay any amount in excess of twice the Medicare rate has been uniformly applied to Defendant’s Arkansas customers,” the complaint alleges.

The plaintiff says her State Farm policy purported to include uninsured and underinsured motorist coverage (UIM) and was in effect at the time of a December 2019 car accident in which she sustained “serious personal injury” due to another driver’s alleged negligence. Per the case, the plaintiff’s damages were in excess of the other driver’s policy limits, meaning he was an underinsured motorist pursuant to the woman’s State Farm policy.

The plaintiff avers that although she submitted proof of loss to State Farm and submitted a claim for underinsured motorist coverage, the defendant has “denied sufficient payment” on her claim due to its policy of paying no more than twice the amount that Medicare would pay for medical expenses.

According to the case, State Farm’s valuation of medical expenses runs contrary to Arkansas insurance law in that the company has failed to issue “prompt, fair, and equitable settlements” of claims for which liability is clear; attempted to settle claims “on the basis of an application that was altered without notice to, or knowledge or consent of, the insured”; failed to provide a reasonable explanation of the denial or settlement based on the policy and appliable law; and compelled insureds to file litigation to recover amounts due.

Initially filed in Conway County, Arkansas Circuit Court, the lawsuit has since been removed to the state’s Eastern District Court.

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