TRENTON
– Attorney General Peter C. Harvey
announced today that New Jersey has entered
into a multi-state settlement agreement
with the State Farm Mutual Automobile
Insurance Company whereby State Farm will
pay eligible consumers a total of $40
million to compensate for losses tied
to the company’s not having properly
titled wrecked or “total loss”
vehicles it acquired from policyholders
and later resold.
According to Harvey, the agreement concerns
vehicles and vehicle titles that State
Farm acquired from policyholders in the
wake of road accidents, theft or other
incidents that ultimately led to the autos
being written off and passed on to salvage
yards, licensed vehicle dismantlers, dealers
or others.
New Jersey and 48 other states require
by law that vehicles be titled as “salvage,”
“junk,” or the equivalent
when they meet certain standards related
to theft, accident, flood damage, general
deterioration, etc. Harvey explained that
State Farm came forward in late 2003 and
acknowledged that, while it had documentation
of having properly titled an estimated
2.4 million vehicles in recent years,
there were thousands more autos for which
it had insufficient or no documentation
that a proper title had been obtained.
He noted that an estimated 30,000-to-40,000
vehicle owners across the United States
may have unwittingly purchased a car ,truck
or Sport Utility Vehicle (SUV) that was
improperly titled by State Farm after
being acquired from policyholders. In
each case, he said, the vehicle at issue
would have been written off as a total
loss for insurance purposes and should
have been given a “branded”
title indicating it was a “salvage”
or “junk” vehicle, but was
not, and later turned up in the hands
of a consumer. In the past year, State
Farm has changed its vehicle titling practices
and, under terms of the multi-state agreement,
will employ a national research firm to
identify the current owners of vehicles
that have not been properly titled as
salvage vehicles. Through a third-party
administrator hired by State Farm, vehicle
owners will be contacted and provided
a compensation claim form.
“Our
office’s objective is to ensure
that auto consumers get what they pay
for with their hard earned dollars. We
must also protect consumers’ safety
by making sure that unsafe vehicles are
not put on the street,” said Attorney
General Harvey.
“There are obviously thousands of
people out there who believe they have
acquired a used car, truck or SUV with
a relatively routine history when, in
fact, they have acquired a vehicle that
was once written off as a total loss due
to damage or other circumstances. These
consumers need to be given the opportunity
to make an informed choice about using
that vehicle, and they need to be compensated,”
the Attorney General added.
Harvey said that consumers who complete
a claim form and are approved will receive
a compensation payment from State Farm
later this year or early in 2006.
Under the agreement, State Farm will work
in the coming months with the New Jersey
Motor Vehicle Commission and motor vehicle
agencies in 49 other states, as well as
the District of Columbia, to determine
in each state the specific vehicles which
require a salvage or “branded”
title. Based on preliminary estimates,
it is believed that more than 3,000 New
Jersey residents own vehicles currently
registered in New Jersey which were not
titled as salvage by State Farm, but should
have been.
All eligible vehicle owners will receive
a letter from the Attorney General in
their home states with a claim form to
complete and return to an independent
Claims Administrator firm – the
Minnesota-based Rust Consulting, Inc.
– which has already been approved
by the states. Rust Consulting will administer
the State Farm consumer notification and
compensation program. After all claims
are in, the amount each vehicle owner
will receive will be finalized and checks
mailed.
Harvey explained that the final amounts
received by individual consumers will
depend on the current value of their vehicles
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 could receive $600;
owners of vehicles worth between $5,000
and $6000 could receive $1,400; owners
of vehicles worth between $10,000 and
$11,000 could receive $3000.
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 state participants for consumer
education, future consumer litigation,
public protection, local consumer aid
funds, and attorney fees and costs.
State Farm Vice-President and Counsel
Jeffrey W. Jackson said State Farm has
made a “commitment to resolve salvage
titling concerns in a proactive manner.”
Jackson added that the settlement agreement
“demonstrates that State Farm is
serious about meeting our responsibilities
under the various state ‘branded’
title laws, and “is the right thing
to do for our policyholders and the public.”
Attorney General Harvey said he respects
State Farm’s decision to come forward
, and to work cooperatively with the states.
“We
hope this agreement will encourage other
companies to step forward when necessary,
take responsibility, improve practices,
and make things right for consumers,”
Harvey said.