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State Farm Volunteers to Pay
Estimated $40 Million to
Buyers in Due Course !

DES MOINES. Attorney General Tom Miller announced today that Iowa and 48 other states plus the District of Columbia have reached an innovative agreement with State Farm Mutual Insurance Company which will result in $40 million in compensation to thousands of vehicle owners nationwide. [Click here to access a copy of the "Assurance of Voluntray Compliance" agreement.]

Miller said that after titling research is complete an estimated 30,000 consumers nationwide may be eligible for payments ranging from about $400 to more than $10,000, depending primarily on the current average value of their vehicle, and the number of consumers who participate in the compensation program. States believe most payments are likely to range from $800 to $1850.

Miller said the agreement resulted after State Farm approached the states and indicated that, after an internal review, in a small percentage of cases it was unable to confirm that it had properly titled vehicles for which it had taken ownership from policyholders due to damage or theft. Miller led the 8-state executive committee of attorneys general who negotiated the settlement.

In most states, depending on factors such as vehicle age and extent of damage, insurance companies taking ownership in such situations must obtain "branded titles," indicating the vehicles are "salvage," "damaged," or similarly-named titles (states use various branding language for such vehicles.) State Farm's records showed that it had properly titled approximately 2.4 million vehicles in recent years that required a "branded title," but that it could not confirm whether a much smaller number may not have been properly titled. Payment will go to the current owners of vehicles that had require branded titles.

Miller said Iowa law requires a full disclosure statement of prior salvage history, and that Iowans may have bought cars that should have been previously titled as salvage.

"This is a groundbreaking settlement," Miller said. "It is rare that a company comes to us, discloses a problem, and presents a very viable solution to correct the problem and help consumers. We hope this agreement will encourage other companies to step forward when necessary, take responsibility, improve practices, and make things right for consumers."

State Farm Vice President and Counsel Jeffrey W. Jackson added, "Our cooperative effort with the state attorneys general reflects a commitment to resolve salvage titling concerns in a proactive manner, and demonstrates that State Farm is serious about meeting our responsibilities under the various state branded title laws. The agreement made by State Farm and the attorneys general is the right thing to do for our policyholders and the public."

In addition to the $40 million for consumers, State Farm also will pay the expense for the major project of identifying the vehicles, tracing the current owners, contacting owners, taking claims from owners, and making compensation payments. In the "Assurance of Voluntary Compliance," or agreement with the states, State Farm also makes assurances about how it presently conducts its practices, as well as in the future.

Miller said that consumers who complete a claim form and are approved will receive a compensation payment from State Farm later this year or early 2006. Under the agreement, State Farm will work with state departments of motor vehicles in the coming months to determine in each state the specific vehicles which require a branded title. The owners of those vehicles will receive a letter from the consumer's home state Attorney General with a claim form to complete and return to an independent Claims Administrator company already approved by the States to administer the notification and compensation program. After all claims are in, the amount each consumer will receive will be finalized and checks mailed.

The final amounts received by consumers will depend on the current value of their vehicle and how many consumers elect to participate in the payment program. Payments will be made to the owners of currently-registered vehicles and will be based on the current average retail value of the vehicle. For example, owners of vehicles worth between $1,000 and $2,000 will receive $600; owners of vehicles worth between $5,000 and $6000 will receive $1400; owners of vehicles worth between $10,000 and $11,000 will receive $3000. [See Par. 27 of the AVC, or Assurance of Voluntary Compliance, for a chart with all estimated value ranges and consumer payout amounts.]

Miller said it is expected that current owners of eligible vehicles will be contacted by Fall 2005, after the identification process is completed.

Attorneys General from 49 states plus the District of Columbia have signed the agreement. The Assurance of Voluntary Compliance has been signed by all states but Indiana, which is working under its own agreement with State Farm. State Farm also is making a payment of a total of $1 million to all the state participants for consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs. The Executive Committee working on this matter consists of the Attorneys General of California, Florida, Illinois, Iowa, Nebraska, New York, South Carolina, and Texas.


The Insurance Consumer Advocate Network is an InterNet based consumer advocacy effort designed to Increase Consumer Awareness as to Insurance Related Issues, Encourage Consumer Involvement with Insurance Related Efforts and Facilitate Consumer Contact with Pro-Consumer Entities.

The InterNet web site for the Insurance Consumer Advocate Network is www.iCan2000.com

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