(USA Herald) — Welcome to another investigative piece from USA Herald, the people’s voice for news that matters. We’ve been keeping tabs on a developing story involving insurance juggernaut State Farm. Today, we’re diving deeper into a class-action lawsuit filed by policyholders, accusing State Farm of undervaluing and underpaying claims.
In a Pennsylvania federal court last week, attorneys filed a motion for class certification against State Farm, claiming that the insurer has been manipulating their estimation software. This software, known as Xactimate, was reportedly set to “new construction” pricing for property loss claims worth more than $100,000. This, regardless of whether the property suffered partial or total loss, led to State Farm undercutting the true value of these claims.
What is Class Certification?
For the uninitiated, class certification is a legal hurdle that needs to be crossed for a lawsuit to proceed as a class-action suit. It ensures that the issues in dispute are common to all members, rather than individual cases. In simpler terms, it’s the go-ahead signal for a group of people to collectively take a party to court.
Behind the Complaint
According to the filed motion, State Farm policyholders allege that the insurer breached the express terms of their policies by exploiting a software setting to reduce payments. Under a standard State Farm policy, loss values should be estimated using the “common construction” method. This method requires State Farm to cover the costs to repair or replace damage caused to properties with materials of similar kind and quality.
The Software Shenanigans
Xactimate has two labor efficiency settings: one for new constructions and another for restoration, service, and remodel (R/S/R). Industry practices and State Farm’s operation guide dictate the “new construction” setting should only be used for total losses. But it appears State Farm implemented this setting for any loss above $100,000, thereby artificially lowering payments.
A Case of Bad Faith Conduct?
Notably, bad faith conduct in insurance terms refers to the intentional deceit or dishonesty by an insurance company to avoid fulfilling its obligations to policyholders. In this case, the allegations against State Farm could potentially qualify as such, given the stark discrepancy in loss estimates and settlements.
The Plaintiffs and Their Ordeal
The main plaintiffs in this case, Jamie and Becky Belotti, suffered a fire loss in September 2019. While State Farm estimated their loss at a paltry $175,451.05, the Belottis’ own assessment was a whopping $374,069.77. The issue was only partially resolved after an appraisal process, setting their dwelling replacement cost at $268,897.70, still significantly lower than the Belottis’ estimate.
Policyholders seek to certify a proposed nationwide class under the Illinois Consumer Fraud Act and a Pennsylvania subclass for breach of express and implied terms of contract under Pennsylvania common law. Essentially, this means they want the court to recognize that these practices have adversely affected customers across the nation.
What This Means for the Public
If these allegations are true, the implications for the public are troubling. It would mean State Farm, and potentially other insurers, could manipulate claims to serve their bottom line, leaving policyholders financially burdened during already challenging times.
As we watch this case unfold, it’s crucial to recognize that insurance policies are not just contracts; they’re safeguards for our homes, our livelihoods, and our peace of mind. Dishonorable practices like these shake the very foundation of trust between the insurer and the insured.
The lawsuit, Belotti et al. vs. State Farm Fire and Casualty Co., is filed under the case number 3:22-CV-01284 and is being heard in the U.S. District Court for the Middle District of Pennsylvania.
By Samuel Lopez | Legal News Contributor for USA Herald
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Disclaimer: This article aims to provide a balanced perspective based on the information available. State Farm is represented by legal counsel and has the right to present its own arguments and defenses in court.