The U.S. Supreme Court will review whether plaintiffs in a case against State Farm Automobile Insurance Co. must demonstrate actual financial harm rather than relying solely on an insurance code violation to proceed with a class-action lawsuit.
The case stems from allegations that State Farm undervalued the cash value of totaled vehicles.
Plaintiffs claim State Farm would inquire about the price of a comparable vehicle and then reduce the offer, arguing that cars often sell for less than their listed prices.
According to court filings, the plaintiffs argue this violates Washington state insurance regulations.
State Farm maintains this method is legal and argues that its legality is not central to the case. Instead, the key issue is whether a statutory violation alone is enough to prove that every class member received less than the amount owed.
Lower courts held that plaintiffs must show actual damages to pursue the class action, but the 9th U.S. Circuit Court of Appeals ruled otherwise.
The appeals court determined that the alleged violation alone was sufficient for class certification, regardless of whether policyholders were underpaid.
State Farm argues that this stance contradicts standard legal requirements. The company insists that policyholders must provide concrete evidence of financial loss.
Court documents note the plaintiffs have pursued the case without offering evidence of actual valuation discrepancies, assuming such proof was not necessary.
The U.S. Chamber of Commerce and several industry associations submitted a brief to the Supreme Court criticizing the 9th Circuit’s decision. They argue the ruling misinterprets how class actions should be evaluated.
The brief states that the court approved class certification without determining whether the plaintiffs’ legal theory was valid.
The groups emphasize that the possibility of resolving a claim with a single legal argument does not meet the standards for class certification.
State Farm’s legal team argues that because the company is required to pay fair market value, evaluating each class member’s claim individually is necessary to determine harm.
If the insurer paid more than fair value in any instance, there would be no valid claim, regardless of a regulatory breach.
