State Farm Mutual Insurance is paying out $40 million to about 30,000 consumers nationwide, plus $1 million to 49 states and the District of Columbia, to make up for the company’s failure to put salvage titles on some of the stolen and damaged cars it has totaled and resold.
At least some Rhode Island consumers will be affected, according to Atty. Gen. Patrick C. Lynch, who issued a news release saying individual payments would range from about $400 to over $10,000, with most consumers getting $800 to $1,850.
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Lynch said State Farm had approached the states and “indicated that, after an internal review, it was unable to confirm that it had properly titled all vehicles from which it had taken ownership 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 must obtain “branded titles,” Lynch said, to ensure buyers know the cars’ history. State Farm’s records showed that while it had properly titled about 2.4 million vehicles in recent years, it might have missed others. Payments will go to the current owners of the affected cars.
Every state but Indiana signed on to an agreement with the insurer to correct the matter. “State Farm was not only cooperative, but also proactive, in its approach to correcting a problem affecting thousands of consumers around the country,” Lynch said.
The titling research has yet to be completed, but State Farm estimates that about 30,000 consumers will be eligible for payments. In Rhode Island, the insurer will work with the Registry of Motor Vehicles to identify the affected cars, then Lynch will send letters to the owners, along with a claims form. Lynch said owners should be contacted by this fall, with compensation checks expected in early 2006.
State Farm will cover the cost of identifying the vehicles, tracing and contacting current owners, taking claims, and making compensation payments, Lynch said. In addition, the company is paying each state $20,000 to support consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs.
