California district attorney alleges USAA, Progressive cheat insureds on auto claims

The complaint also alleges that the insurers prefer to declare a vehicle a 'total loss,' regardless of whether it is economical to repair.

“California residents and small businesses try their best to follow the law. They expect their insurance companies and affiliates to do the same,” Alameda County District Attorney Pamela Price said. (Credit: Nick Fox/Adobe Stock)

Alameda County District Attorney Pamela Price sued USAA entities and Ohio-based The Progressive Corp. and their valuation vendors in California Superior Court for alleged violations of California’s Insurance Code, unfair competition law and false advertising law.

The complaint, spotted on Law.com Radar, demands civil penalties, restitution for tens of thousands of California consumers, injunctive relief and associated fees and costs.

The complaint is the result of the county district attorney’s Consumer Justice Bureau investigation. Staff attorneys are being assisted on the case by Austin, Texas-based Hendler Flores, a boutique personal injury law firm, and the May Jung firm in Orange, California.

According to the complaint, USAA contracts with CCC Intelligent Solutions Inc. and Progressive Insurance contracts with Mitchell International Inc. to obtain valuations on vehicles the insurers have deemed total loss claims.

The complaint alleges that the insurers and their valuation vendors knowingly manipulate market value reports to produce “actual cash value” valuations that are systemically understated by thousands of dollars, to the detriment of consumers.

In addition, the complaint alleges the scheme is done in secret.

The complaint also alleges that the insurers prefer to declare a vehicle a “total loss,” regardless of whether it is economical to repair it because they can then allegedly take title and auction vehicles for salvage to recoup some of the payout given to consumers.

USAA did not respond to an ALM and Texas Lawyer request for comment, but in a statement issued Monday said the allegations are “completely lacking in merit” and claimed the CCC total loss valuations are an “accurate and fair tool” for loss settlements.

Progressive did not respond to a request for comment.

Price, “on information and belief,” alleges that the scheme can be proved by comparing defendants’ vendor software sold to third-party independent appraisers versus the “manipulated” software used for the insurer defendants.

Mitchell offers an “off-the-shelf” version of its WorkCenter Total Loss software, the complaint states.

“Progressive and Mitchell worked together to design and implement a highly customized WCTL software for Progressive. No private adjusters or insureds have any way of accessing the customized software,” the complaint claims.

Consequently, two appraisers — one representing the insurance company and one representing an insured — could appraise the same total loss vehicle using the same set of comparable vehicles, yet the appraisers could produce two different values, the complaint claims.

“This exemplifies bad faith claims handling,” the complaint alleges.

Citing a “real-world example,” the district attorney included an insurance claim file for a 2006 Ford Econoline cargo van with 48,474 miles when it was involved in a head-on collision with an intoxicated driver and deemed a total loss.

The insured bought the van on May 26, 2022, for $17,995 and the collision occurred Aug. 7, 2022. The Progressive “actual cash value” offer was $12,520, or $5,475 under the purchase price.

The insured invoked appraisal, which resulted in a determination of $17,000 actual cash value, the complaint asserts.

“Progressive’s scheme became clear upon thorough analysis of the MVR during appraisal,” the complaint alleges, claiming Progressive selected two “comparable vehicles” that had prior accident damage but the insured’s van did not have prior damage.

In addition, the National Automobile Dealers Association prescribed an $8,400 mileage adjustment in favor of the loss vehicle because it had 48,474 miles, whereas the Progressive comparables had 153,815 miles and 167,029 miles, respectively, the complaint says.

Price announced the complaint last week, stating in part, “Many residents live paycheck to paycheck and go deeply into debt just to buy a car. When an insurance company underpays its customers for a totaled vehicle, that can result in missed loan payments, damaged credit scores, impacted borrowing, and the inability to buy a replacement vehicle. That can lead to job losses and even homelessness.

“California residents and small businesses try their best to follow the law. They expect their insurance companies and affiliates to do the same,” Price said.

The Hendler Flores firm declined to comment, deferring any questions to the district attorney’s office.

The California Department of Insurance reported that USAA made up approximately 5% of the California private passenger collision insurance market in 2021.

“Based on that percentage … approximately 30,000 USAA insureds suffer a total loss claim in California annually. Over four years, these numbers approximate … 120,000 USAA total loss claims in California — all of whom are subject to defendants’ scheme,” the complaint alleges.

The complaint requests the defendants be enjoined from engaging in “unfair, unlawful, and fraudulent business practices,” and demands an award of $2,500 per violation.

In addition, the complaint requests separate awards of $2,500 per violation perpetuated against a senior citizen or disabled person and a separate award of $2,500 for violations against a service member or veteran, pursuant to the relevant state statutes.

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