The company, which voluntarily notified state attorneys general of the problem, failed to identify - or "brand" - the titles of vehicles that had been salvaged or damaged when it received the titles from the original owners, as required by law. The vehicles were then sold to new owners, who may have been unaware the vehicles had been totaled by State Farm because the titles were not branded properly. Such sales occurred as far back as June 1997.
California joined along with other states - Texas, Florida, Illinois, Iowa, Nebraska, New York and South Carolina (the executive committee) - in spearheading the settlement, which includes 49 states and the District of Columbia, totaling $40 million nationwide. Compensation ranges from $400 to $20,000, depending on the current average retail value of vehicles and the total number of claims.
According to the settlement, State Farm will track vehicle identification numbers of damaged vehicles sold in this manner and will notify the owners their titles may be faulty. Interested consumers can then file with the claims administrator for the compensation offered.
The claims process will occur over the next several months, as State Farm works with motor vehicle departments in the various states to obtain the necessary title information. Refunds will be issued after the claims process is completed.
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 will conduct its practices, now and in the future.
Arizona on board
"This agreement compensates consumers who depended on the seller to provide a vehicle with a clean title," explained Arizona Attorney General Terry Goddard. "I hope this agreement will encourage other companies to step forward when necessary, take responsibility, improve practices, and make things right for consumers."
State Farm also is making a payment of $15,000 to the Arizona Attorney General's Office to be used for consumer education and public protection. All states but Indiana signed onto this agreement. Indiana is working on its own agreement with State Farm.
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."