Divided Appellate Panel Upholds Total Loss Valuations Using CCC Software

An insurer that used CCC Intelligent Solutions software to determine the payout for a claimant’s vehicle did not violate a Florida law that sets forth only three methods that auto insurers may use to determine actual cash value, a divided panel with the 11th Circuit Court of Appeals ruled.

In a 2-1 decision Monday, the appellate panel affirmed a ruling by the US District Court for the Southern District of Florida that dismissed a putative class action lawsuit filed against Safeco Insurance Co. of Illinois. Policyholder Gina Signor alleged that Safeco failed to comply with Florida Statute 626.9743 when it used CCC to determine a total loss payout for her 2014 Lexus.

“The meaning of this statute is a question of first impression in our Circuit,” the majority opinion says. “Further, we have no authoritative interpretation of it from Florida’s appellate courts to guide us.”

Class action lawsuits alleging improper valuation methods have been costly for auto insurers in recent years. Last month, a federal judge gave preliminary approval to a $2.3 million settlement in a class-action lawsuit against USAA Casualty Insurance Co. for allegedly underpaying for taxes on totaled vehicles.

In 2021, American Family Mutual Insurance agreed to pay $5.7 million to settle a lawsuit that alleged it had underpaid total loss claims in Washington state by using a “typical negotiation discount when determining actual cash values. PEMCO Insurance Co. also agreed in 2021 to pay a $14.1 million settlement for using a similar discount in Washington.

The decision in Signor’s case may save Safeco from a similar costly settlement.

Safeco determined that Signor’s vehicle was a total loss after an accident. It used CCC’s One Market Valuation system to calculate the value of that loss.

The system uses recent dealer advertised prices for 12 comparable vehicles to determine a base value and applies a “uniform condition adjustment” to account for the difference between vehicles in “dealer ready” condition and privately owned vehicles in “normal wear” condition, according to the majority opinion. Signor’s Lexus was given a base value of $17,377. CCC’s system then added a “component condition adjustment” to account for the above-average condition of her vehicle, which resulted in an upward adjustment of $589. Safeco paid Signor a total of $18,701.71 for her claim after adding the cost of taxes and fees and subtracting the $500 deductible.

When Signor purchased a Subaru Legacy to replace the Lexus, she had to pay $899 in dealer fees out of pocket. She filed a lawsuit, seeking class action status, alleging that Safeco had not paid her and similarly situated claimants the actual cash value of their vehicles.

Her lawyers base their case on Section 626.9743(5) of Florida statutes, which lists three methods that insurers may use to determine value in total loss claims:

1. The cost of two or more comparable vehicles available in the preceding 90 days.
2. The retail cost as determined from a generally recognized used motor vehicle industry source.
3. The retail cost using two or more quotations obtained by the insurer from two or more local licensed dealers.

Signor argued that Safeco violated the statute when it adjusted the advertised prices of comparable vehicles to account for the difference between “dealer ready” vehicles and privately-owned vehicles with normal wear. Secondly, she said Safeco erred by using advertised prices instead of actual sale prices as a starting point to determine value. Thirdly, she said CCC’s calculation was not based on a “generally recognized used motor vehicle industry source” as required by the statute.

The majority opinion said that the statute allows insurers to use any of the three methods listed in the statute; they are not required to use all three. CCC’s valuation was based on the first method, the cost of comparable vehicles.

The statute requires the settlement amount to be “based upon” the actual cost to purchase a comparable vehicle. Also, the valuation must be “derived from” one of the three listed methods.

“The statute’s use of ‘derived from’ instead of ‘equal to’ or similar language means that the cost of comparable vehicles in subsection (5)(a)(1) must be the starting point for determining actual cost, but not necessarily the ending point,” the opinion says. “The actual cost need not be the same as the cost of comparable vehicles.”

Similarly, the majority said the statute requires a settlement to be “based upon” the actual cost to purchase a similar vehicle. That indicates an insurers may adjust the value after making that calculation.

Circuit Judge Britt C. Grant dissented. She said the majority misread the meaning of the terms “derived from”and “based upon.”

“As a result, under the majority’s interpretation, an insurer has freewheeling discretion to set “actual cost” at any amount,” she wrote in a separate opinion.

One of Signor’s attorneys, Roger L. Mandel with the Jeeves Mandel Law Group in Fort Worth, Texas, said his client had not determined as of late Wednesday whether she will appeal the decision or request an en banc ruling by the full 11th Circuit.