Class actions against car insurers

A class action lets one or a few policyholders sue a car insurer on behalf of everyone treated the same way, such as every customer whose totaled car was valued with the same formula. Most suits against car insurers involve small amounts per person and uniform company practices: total-loss valuations, fees, premium charges and, more recently, driving data. Since 2023, six federal appeals courts have refused to let the most common type, challenges to total-loss valuation adjustments, proceed as class actions.

How a class action works

1. Filing. A named plaintiff sues on behalf of a proposed class, for example "all Pennsylvania policyholders whose total-loss payment included a certain deduction."
2. Class certification. The judge decides whether the case can proceed as a class. In federal court, Rule 23 requires, among other things, that common questions "predominate" over questions that differ person to person.
3. Appeal of certification. Either side can ask the appeals court for permission to appeal the certification decision immediately. For insurers, this is often the turning point.
4. Settlement or trial. Most certified cases settle. A settlement must be approved by the judge after notice to class members, who can file claims, object or opt out.

Because each person's loss is often a few hundred dollars, individual suits rarely make sense. Certification is what gives the case its value, which is why the fight over it matters so much.

Total-loss valuation suits

When an insurer declares a car a total loss, it owes the car's actual cash value, usually calculated by a valuation vendor from listings of comparable cars. Insurers and vendors then apply adjustments. The one most often challenged reduces the comparable cars' advertised prices to reflect what buyers typically negotiate off a dealer's list price. Progressive used a "projected sold adjustment" from Mitchell; State Farm used a "typical negotiation adjustment" in valuations from Audatex, according to the court opinions.

Plaintiffs argue the deduction is systematically wrong, for example because dealers increasingly sell at or near list price, so every class member was underpaid. Insurers respond that the adjustment reflects real market behavior, and that whether any particular person was underpaid depends on that car's true value.

The appeals courts have largely sided with the insurers on certification:

Sources: the published opinions of the Third, Fourth, Sixth and Ninth Circuits; the Sixth Circuit's opinion lists the earlier decisions.

The reasoning is consistent. In the Sixth Circuit's words, the question is whether owners who believe a formula "includes an improper reduction" can sue as a class, and "five circuit courts have now said 'no'" because individual questions about each used car's value would dominate. The Tennessee class in that case covered about 90,000 vehicles. Proving that State Farm failed to pay actual cash value would require evidence about each car, not just the size of the deduction. Dissenting judges in the Fourth, Sixth and Ninth Circuits argued the common formula should be enough.

There is one notable exception. When a state's own rules flatly prohibit a particular adjustment, damages can be as simple as refunding the deduction. The Third Circuit pointed to a 2024 Ninth Circuit case against State Farm under Washington law, Jama, as that kind of case. The difference is between arguing an adjustment is inaccurate, which needs car-by-car proof, and arguing it is illegal, which may not.

Other recurring theories

• Taxes and fees on total losses. Many states require insurers to include sales tax, title and registration fees in a total-loss cash settlement, and the NAIC model regulation does too. Where a state requires them, leaving them out of a group of settlements is the kind of uniform, rule-based practice that suits a class claim.
• Premiums and fees. Challenges to charges such as installment fees or charges after cancellation usually turn on whether a state statute or the policy allowed the charge.
• Claims-handling practices. Challenges to uniform repair practices, such as labor rates or parts choices, run into the same problem as valuation cases when damages differ by car.
• Driving data. Private suits against automakers and data brokers over the sale of driving behavior to insurers have been consolidated in federal court; see driving data privacy lawsuits.

Separate from class actions, a policyholder's individual claim that an insurer acted unreasonably is a bad faith claim; see insurance bad faith explained.

What the certification trend means for you

The decisions do not say the adjustments are lawful or that any payment was correct. They say the dispute usually has to be resolved car by car. In practice, that means your individual tools matter more:

1. Get the full valuation report after a total loss and check every comparable and adjustment; how insurers calculate actual cash value explains each line.
2. Challenge the number in writing with your own comparable listings; see how to negotiate a total loss settlement. The total loss payout estimator helps estimate a fair figure.
3. Use the appraisal clause if you and the insurer still disagree on value.
4. Complain to your state department of insurance if the insurer will not explain its adjustments or ignores state total-loss rules.

If you receive a class action notice

1. Check that it is real. Court-approved notices name the case, the court and a settlement administrator. Look the case up on the court's site, or call the administrator using contact details from the court record rather than the email. Be wary of anyone asking for payment to file a claim.
2. Read the class definition to see whether you are in it and what you give up.
3. Decide by the deadline. You can file a claim, do nothing (and usually be bound with no payment), object, or opt out to keep your right to sue individually.
4. Weigh opting out only if your own loss is large enough to pursue separately; talk to a licensed attorney first.
5. Keep your claim file. Valuation reports and payment records may be needed to prove a claim.

Key takeaways

• Class actions against car insurers usually target uniform practices with small per-person losses, such as total-loss valuation deductions and fees.
• From 2023 to April 2026, six federal appeals courts refused to certify classes challenging negotiation-style valuation adjustments, mainly because each car's value must be proven individually.
• Cases built on a state rule that flatly bans an adjustment have fared better.
• With class relief harder to get, your own tools matter more: the valuation report, written negotiation, appraisal and your state insurance department.
• Verify any class notice through the court before acting, and note the opt-out deadline.