Moffitt v. State Farm Mutual Auto Insurance Co., No. 20-1044 (8th Cir. 2021)Annotate this Case
Plaintiffs, vehicle owners, filed suit alleging that State Farm violated Arkansas Insurance Rule 43, which governs loss settlements, and thus committed fraud in the inducement, breached their contracts, acted in bad faith, and engaged in an unconscionable, false, or deceptive act or practice in violation of the Arkansas Deceptive Trade Practices Act (ADTPA). Plaintiffs' claims stemmed from State Farm's use of a computer-generated vehicle valuation report to determine cash settlement amounts for the vehicle owners' automobiles' total losses. After removal to federal court, the district court dismissed the claims based on its finding that Rule 43 did not provide a private right of action.
The Eighth Circuit affirmed on different grounds, concluding that State Farm's settlement practice complied with Section 10(a)(3) of Rule 43. Therefore, the vehicle owners have failed to state a claim. The court explained that Section 10(a)(3) does not require insurers to justify their deviation from the methods prescribed in Section 10(a)(2). Rather, the Rule requires only that insurers thoroughly document any value deductions when they deviate from Sections 10(a)(1) and (2). In this case, State Farm's valuation reports, which are attached to the vehicle owners' complaint, clearly set forth the itemized deductions and additions in compliance with Section 10(a)(3). Furthermore, the report fully explained the basis for the final settlement amounts.