Progressive Settles New York Case Over Unpaid Sales Taxes on Total Loss Claims

At the same time it is settling a New York class action about underpaying totaled loss claims for $48 million, Progressive Insurance, in a separate case, has agreed to an $18.3 million settlement over allegations that its carriers failed to pay claimants the state sales tax on the actual cash value when their vehicles were totaled.

The sales tax class action alleges that Progressive insurers violated auto insurance policies and New York law when, under a policy provision requiring they pay the “actual cash value” of the “total loss” vehicle, they failed to include an amount representing sales tax.

Under the $18.3 million settlement, the claimants will be able file to receive approximately 77.5%, or more, of the unpaid combined sales state and local sales taxes of 8%. Some drivers say they are owed the full sales tax amount, while other say they are owed a partial amount.

Lawyers for the class, estimated to include 31,002 members, has asked Judge Vincent L. Briccetti, U.S. District Court Judge to approve the agreement, the terms of which the drivers’ lawyers describe as “fair, reasonable, and adequate” to the class members.

Progressive to Pay $48M to New York Drivers Over Underpaid Total Loss Claims

The judge gave preliminary approval to the settlement in March. A hearing on approval has been set for August 6.

The settlement resolves the class action claims against Progressive companies including Progressive Advanced, Progressive Casualty, Progressive Specialty and Progressive Max.

The settlement class consists of all individuals with personal automobile insurance policies issued in New York who made a claim for comprehensive and collision coverage under their policy that was adjusted as a total loss, settled by Progressive on an ACV basis, and who Progressive paid no New York sales tax, or who received some amount of sales tax, but less than 8% of the ACV, at any time between September 10, 2014, and the date of preliminary approval of the settlement, which was March 27, 2024.

In the $48 million total loss claim case, the plaintiffs allege that the third party software used by Progressive — Mitchell International, Inc.’s WorkCenter Total Loss — applies an improper adjustment called the projected sold adjustment (PSA) in settling total-loss claims. The plaintiffs claim that the PSA results in a 6.5% underpayment. The settlement covers New York drivers who have filed claims since July 28, 2015.

U.S. District Judge Lorna Schofield has set a hearing for August 14 in the $48 million case.

Progressive denies any wrongdoing and says it followed all insurance policies and state laws.

Another major auto insurer, GEICO, is in the process of settling a case in federal court New Jersey for $1.9 million over its alleged failure to pay total loss claimants required transfer fees. The state of New Jersey imposes a number of regulatory fees associated with the titling or registration of a vehicle. The title transfer fee is $60.00 and the registration transfer fee is $4.50.