Mich. AG Enters Deal with State Farm On Faulty Titles

Michigan has reached a multi-state agreement requiring State Farm to voluntarily pay $40 million to compensate consumers whose titles provided by the insurance company failed to notify consumers the vehicles were previously damaged by theft or accident, Attorney General Mike Cox announced.

After titling research is complete, an estimated 30,000 consumers
nationwide may be eligible for payments ranging from approximately $400 to $10,000 under the agreement entered into by 49 states and the District of Columbia. The actual amount of payments depends, in part, on the vehicles’ current value and the number of consumers participating. The average payment is expected to range from $800 to $1,850 per consumer.

“My office is here to safeguard consumers before they buy a product, and that protection continues after their purchase,” Cox said. “Consumers have an absolute right to know what they are buying. I commend State Farm for proactively entering this settlement and I am confident it will encourage other companies to double check their internal procedures to ensure consumers receive all vital information.”

An internal review by State Farm reportedly revealed it could not confirm proper titles for a small percentage of vehicles it acquired from policyholders due to damage or theft. In Michigan, depending on factors such as vehicle age and extent of damage, insurance companies taking ownership in such situations must obtain a salvage certificate of title or branded title.

According to State Farm, it properly titled approximately 2.4 million vehicles in recent years. State Farm will work with the Michigan Secretary of State in the coming months to determine the specific vehicles which require a branded title and payment will go to the current owners of those vehicles.

“From a safety standpoint, it is important that consumers have full
knowledge of their vehicles’ repair records,” Secretary of State Terri Lynn Land said. “We support this effort and will work with the Attorney General and State Farm to make sure that the vehicles involved receive proper titles.”

In addition to paying $40 million to consumers, State Farm also agreed to pay states for costs associated with identifying vehicles and owners, taking claims, and making compensation payments. State Farm is making a total payment 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.

Michigan owners of those vehicles will receive a letter from Attorney
General Cox with a claim form to complete and return to an independent Claims Administrator already approved by the states to conduct the notification and compensation program.

After a claims deadline, the amount each consumer is due will be finalized and checks mailed. Current owners of eligible vehicles
are expected to be contacted by fall 2005, and compensation payments will be made in late 2005 or early 2006.