A California District Attorney is suing major car insurance companies, including Progressive and the United Services Automobile Association (USAA), for allegedly working together to undervalue “totaled” vehicles. 

In a lawsuit announced on May 9, Alameda County District Attorney Pamela Price accused the insurance giants and their affiliated software developers of using valuation software to systematically undervalue “totaled” vehicles and pay car owners less than the actual value owed according to their policies. 

Price claims the process violates several state laws and is pressing for civil penalties, restitution for California drivers, injunctive relief, and corresponding fees and costs. “Many residents live paycheck to paycheck and go deeply into debt just to buy a car,” Price said. “When an insurance company underpays its customers for a totaled vehicle…that can lead to job losses and even homelessness.”

The lengthy complaint, filed on April 26, alleges car insurance companies like the Progressive Corporation, USAA and affiliates owe “duties of good faith and fair dealing to hundreds of thousands of California residents and businesses each year.” 

According to Patch, the suit points the finger at software developers who worked with the insurance companies to manipulate and lower the “actual cash value” of totaled vehicles. The scheme allowed customers to make “lowball” settlement offers. Then, the DA’s office alleges, the companies would resell the vehicle at auction in order to minimize the losses after the policyholder agreed to the low offer.

The DA office feels the alleged scheme affects all California drivers but specifically targeted senior citizens and veterans. Business owners are also impacted, including car manufacturers and dealers, since insurance companies were “systematically lowering the market value of their vehicles;” gap insurance providers, whose “gap insurance” policies are required to make up the difference between outstanding loan amounts and the undervalued amount paid; and car loan entities, when suffering car owners are no longer able to pay on car loans. 

Lastly, the complaint lists auto mechanic shops as being affected as businesses will potentially lose out on repairs after vehicles are “systematically” totaled instead of repaired. “Public safety includes protecting consumers from powerful companies that seek only to maximize profits,” Price said. 

“We are seeking to level the playing field for vehicle owners who face what looks like a rigged game when their car or truck is totaled because a loss of a vehicle can destabilize a person’s life.”

Price’s office is seeking anyone who believes they are a victim of an insurer undervaluing their vehicle, and are looking for them to complete a consumer fraud complaint form.

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