Getting Totaled by State Farm

Redlands, CAOver the past several years, State Farm Insurance has taken public steps to shine up its image of fair dealings with its policyholders. Yet it revealed quite a darker face to Rachel when she tried to obtain a State Farm totaled vehicle title for an unfit car.

"In 2003 I had an accident," say Rachel, "and reported it to State Farm. My agent provided me with a list of the company's preferred repair service suppliers and I chose Caliber Motors. They estimated the damage at $7,500 for a 2000 Mazda 626 worth $9,000 by then. To me, that felt like a lot of damage, so why not total it, but they refused."

Given the industry's practice of writing off a damaged vehicle whose repair bill is projected to cost from 50 to 80 percent of the car's value, depending on the state, why would State Farm insist on repairing one that exceeded 83 percent? State Farm determines its 'damaged beyond repair' limit or total loss title by calculating the cost of repair as a percentage of the vehicle's pre-collision value, and its make, model and year.

The data used to determine those figures is unavailable to the consumer, wherein lies countless discrepancies. It is provided to insurers through subscription to a private database of car values--the largest provider being CCC Information Services, used by the top 50 insurers across the country. They arrive at a market value by comparing the vehicle in question to similar make and model, much like adjusters. The total loss value becomes the lowest price a dealer would 'take' or sell that vehicle for, not to be confused with the dealer's lowest asking price.

Insider vehicle values are also calculated by comparing a selection from local newspapers and trade magazine prices. CCC's competitor, ADP Claims Solutions Group, also pulls its data from 1,200 dealers and thousands of automobile trade publications. According to Insure.com--the consumer information service for self-directed insurance shoppers and voted Best Insurance Site on the Web by Forbes.com--any of these methods "can be used to fleece you out of real-life value of your car".

Rachel fought with both State Farm and Caliber Motors to obtain a totaled title on her car, and therefore receive due compensation, but to no avail. "When I got the car back two months later, it wasn't running right," says Rachel. "As I'd been hit on the passenger front side, there was trouble with the tires and the front end alignment. Sure the repair work came with a lifetime warranty but it was all wrong.

I must have written at least 15 letters to State Farm in 2003 and I continued right through 2004, at which point a real live manager told me, 'there's nothing we can do', and no input from my insurance rep helped. Bottom line--my case was closed."

Rachel appealed to the California Bureau of Automotive Repair (BAR), which regulates more than 35,000 state automotive repair dealers. BAR had the car inspected and despite their agent's comment that the vehicle should have been totaled, Caliber was instructed to correct their work. The fact that Rachel had been driving the damaged car for two years further complicated the repairs. Serious safety issues, such as a missing motor mount bolt, continued to appear. And State Farm still refused to reopen the case.

She then turned to the California Department of Insurance to enforce insurance-related law. The consumer protection agency licenses and regulates the rates and practices of over 1,500 insurance companies, agents and brokers in California. In the 12 months leading up to Rachel's accident, CDI's Field Claims Bureau reported 28 alleged violations of claims policy procedures against State Farm.

Nudged by CDI's involvement, State Farm reopened Rachel's case but it lead to no compensation, and most importantly, it was too late for her car. "On December 31, 2005 I was on the freeway when I heard this pop. One of the coils in the front had dropped off. I exited, coincidentally right near a Mazda dealership, coasted into their parking lot and, there and then, I traded that 2000 626 for a 2005 model.

Even to this day I'm as mad as hell about everything I went through. That car was a death trap; I could've been killed. I tell you, if I could find another agent I would. And you know, all along I was waiting for a letter from them dropping me, I've got homeowners insurance with them, but there was no apology, and it's still 'your payment is late, where's your money?' I'd advise everyone to stay away from State Farm."

State Farm Insurance continues to display a trickster's face to the public. At the same time, in 2005, when Rachel was fighting her last automotive battle with the insurer, the company voluntarily came forward and admitted to the fraudulent practice of improperly titling totally wrecked vehicles (salvaged or totaled) that were then resold to the public. That blow was both softened and aggravated by an agreement between 49 state attorney generals and State Farm to compensate the current vehicle owners as long as they agreed not to sue the insurer. And it is under fire again for allegedly shortchanging policy owners on the price of their totaled vehicles.