Farmers Owes Sales Tax and Title, Registration Fees as Part of Vehicles’ ‘Actual Cash Value,’ Class Action Says

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A proposed class action alleges Farmers Insurance Company has wrongfully failed to include sales tax and/or vehicle title and registration fees in loss payments made to auto policyholders. 

The 12-page complaint in Oklahoma alleges Farmers is obligated to pay sales tax and/or vehicle title and registration fees given its standardized auto insurance policy stipulates it will pay to insureds the “actual cash value” of stolen or damaged property. According to the suit, Farmers’ policy language does not contain any provision that excludes sales tax and/or vehicle title and registration fees from a car’s actual cash value, or one that defers payment of sales tax and/or title and registration fees for any purpose whatsoever. 

The case argues that it’s widely understood that the “actual cash value” of a vehicle, when not broken into specifics in an insurance policy, includes the fees a consumer would necessarily pay upon replacement of the insured vehicle. 

“Courts throughout the country have recognized that ‘actual cash value,’ when undefined in an insurance policy, should be defined as the repair or replacement cost minus depreciation—a definition which would include fees necessarily incurred upon replacement of the insured vehicle, including Sales Tax and Vehicle Title and Registration Fees,” the lawsuit says.

The plaintiff, a McCurtain County, Oklahoma consumer, claims in the case that Farmers calculates the base and adjusted value of a lost or damaged vehicle through a third-party vendor who bases vehicle valuations on the cost to buy a similar car with similar conditions and mileage. Although the third party identifies the underlying value of comparable vehicles, from which it then adjusts based on differences in mileage, trim and options, no amount for title and registration fees is included in the amount listed in the entity’s market valuation report, the case says. 

“Notably, the CCC Market Valuation Report stated that, ‘The total may not represent the total of the settlement as other factors (e.g. license and fees) may need to be taken into account,’” the lawsuit reads. 

Per the case, Farmers breached its contract with the plaintiff by failing to include sales tax in its total loss payment. 

The suit looks to represent all insureds “under any Oklahoma policy issued by Farmers Insurance Company, Inc. and its subsidiaries with the same operative policy language covering a vehicle with private-passenger auto physical damage coverage for comprehensive or collision loss where such vehicle was declared a total loss, who made a first-party claim for total loss, and whose claim was adjusted as a total loss, within the applicable statute of limitations period until the date of class certification, who were not paid Sales Tax and/or Vehicle Title and Registration Fees.”

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