Class Action Alleges State Farm Underpays Injured Claimants for Lost Wages

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A proposed class action claims State Farm Mutual Automobile Insurance Company unlawfully lowers the maximum amount of lost wages to which policyholders and their beneficiaries are entitled following an accident.

According to the 14-page case, although New York insurance law caps the amount of coverage for lost wages—defined as the “[l]oss of earnings from work which the person would have performed had he not been injured”—at $2,000 per month, State Farm improperly reduces the amounts paid out to policyholders, their assignees, and all other “covered persons” entitled to receive benefits by more than the statutory amount due to the insurer’s improper interpretation of the law.

Per the lawsuit, “basic economic loss,” as defined under New York insurance law, sets the amount of coverage for a covered individual’s medical expenses and wages at $50,000, with a $2,000 per month cap on wages for the first three years after an accident. “First party benefits,” according to the case, are the amounts of medical and wage benefits a covered person is entitled to receive from their basic economic loss coverage and include wages calculated as “payments to reimburse a person for basic economic loss.” These are also capped at $2,000 per month, the suit says.

The lawsuit alleges State Farm has improperly reduced the first party benefits paid to insureds and their beneficiaries by lowering the basic economic loss coverage limits by more than the $2,000 monthly cap for lost wage payments.

The plaintiff, the suit says, was a passenger in a vehicle insured by State Farm during a July 2019 car accident in which he sustained injuries. According to the complaint, the plaintiff applied for first party benefits under the driver’s insurance policy and subsequently received from State Farm a total of $49,214.90 in first-party medical benefits and $14,444.08 in first-party wage benefits over a period of five months. State Farm, the lawsuit claims, also took a credit of $4,420.00 in New York State Disability benefits and $2,648 in Social Security benefits, adding up to a total of $70,726.98 paid to the plaintiff for first-party benefits.

At the time of the July 2019 accident, the plaintiff’s actual monthly wage was $3,424.99, the suit says, meaning he was entitled to basic economic loss coverage of $75,000.00—a sum comprised of basic economic loss coverage of $50,000 and optional basic economic loss coverage of $25,000.

According to the suit, however, State Farm improperly determined the plaintiff’s basic economic loss coverage had been exhausted and terminated his benefits after he had only received $70,726.98 of his $75,000 of coverage. Per the case, State Farm had improperly reduced the plaintiff’s coverage amount by more than the statutory $2,000 cap per month for wage payments.

As a result of State Farm’s termination of his benefits, the plaintiff was unable to pay the $4,273.02 balance of first-party medical benefits and/or to receive additional wage benefits to which he was entitled, the lawsuit says.

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