PRESS RELEASE FOR IMMEDIATE RELEASE
Contact: Lori Sitler or Janice Fitzsimons
Phone: (302) 577-8314
Pager: (302) 247-1132
Date: January 10, 2005
Multi-State Agreement with State Farm Will Result in $40 Million to Consumers
(Wilmington, DE): Attorney General Jane Brady said today that Delaware 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 car, SUV, and truck owners nationwide.
Brady said that after titling research is complete an estimated 30,000 consumers nationwide may be eligible for payments ranging from about $400 up to over $10,000, depending primarily on the current average value of their vehicle, and the number of consumers who participate in the compensation program. The states believe most payments are likely to range from $800 to $1,850.
According to Brady, the agreement resulted after State Farm approached the states and indicated that, after an internal review, in a small percentage of cases, State Farm was unable to confirm that it had properly titled vehicles it had taken ownership of from policyholders due to damage or theft.
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," "reconstructed" or similarly-named titles. State Farm's records showed that although it had properly titled approximately 2.4 million vehicles in recent years, it could not confirm whether a much smaller number have been properly titled. Payment will go to the current owners of vehicles that may require branded titles.
Attorney General Brady called the settlement groundbreaking. "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," Brady said. "We hope this agreement will encourage other companies to step forward when necessary, take responsibility, improve practices, and compensate affected consumers."
In addition to the $40 million for consumers, State Farm also will pay the expense of identifying the vehicles, tracing the current owners, contacting owners, taking claims from owners, and making compensation payments. In the agreement with the states, State Farm also makes assurances about its present and future titling practices.
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 with a claim form to complete and return to an independent Claims Administrator to administer the notification and compensation program. After all claims are in, the amount each consumer will receive will be finalized and checks mailed. Attorney General Brady 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.
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.
Attorney General Brady said it is expected that current owners of eligible vehicles will be contacted by Fall 2005, after the identification process is completed.
State Farm also is making a payment of a total of $1 million to all the participating states for consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs. Delaware's Consumer Protection Fund expects to receive $15,000 as its share of this payment.