Palisades Directs Vendor to Cut Total Loss Payments With ‘Baseless’ Price Adjustments, Class Action Alleges

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A proposed class action claims Palisades Insurance Company has systematically reduced the value of total loss payments made to insureds by applying a baseless “projected sold adjustment” to the value of their vehicles.

The 17-page case alleges that although Palisades represents in its auto insurance contracts that it will pay the actual cash value of a covered vehicle in the event that repair to the “total loss” car is impossible or uneconomical, the defendant “skirts its straightforward contractual obligation” by directing its third-party valuation vendor to artificially reduce the totaled car’s value. According to the suit, after the vendor determines the price of comparable vehicles, Palisades has the third party apply a “projected sold adjustment” that ultimately decreases the amount paid to claimants.

The lawsuit alleges Palisades’ “deceptive, fraudulent, and unfair scheme” violates New York state law and constitutes a breach of contract with the insurer’s customers.

The case explains that third-party vendor Mitchell determines the value of a totaled vehicle by assessing its market value as determined by the retail cost of comparable cars recently or currently for sale. Per the suit, Mitchell then applies at the defendant’s instruction a blanket percentage reduction to the selling price of comparable vehicles based on their listing price. The lawsuit alleges that this so-called projected sold adjustment, which Palisades represents as a reflection of “some sort of average difference between a dealer list price and ‘what the dealer would be willing’ to sell it for,” is not based on any comparable vehicle’s features that may be related to consumer negotiations, but is “arbitrarily applied” to any vehicle in a given price range.

“For example, and by way of illustration only, if a car is listed for sale at $10,000, the vehicle could be reduced by 7%. Now if an identical vehicle of the same make, model year and trim is listed at $15,000, the vehicle might be reduced by 10%, regardless of the fact that both vehicles shared the same make, model, year, and features,” the complaint reads. “There is no rational explanation for why the two identical vehicles would be subject to such varied reductions in their selling price.”

The suit claims Palisades applies the projected sold adjustment without contacting dealerships or even determining whether their vehicles are ever discounted. According to the complaint, an across-the-board reduction of comparable vehicles’ listing prices does not reflect market realities, especially considering that most used car dealerships have banned price negotiation.

The suit further alleges that Palisades does not instruct Mitchell to apply projected sold adjustments in every state in which the insurer operates, and other insurers who work with Mitchell do not apply the reductions at all, according to the case.

The lawsuit looks to represent New York citizens insured by Palisades who, from the earliest time allowed by law until the date of a class certification order, received a first-party total loss valuation and payment on a total loss claim that included a projected sold adjustment or similar adjustment.

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