State Farm has offered expert testimony from Solera and moved to file certain documents under seal in an ongoing lawsuit over actual cash value (ACV).
Plaintiffs from multiple states first filed the suit in 2022. They claim that State Farm misled them by saying it would pay “the actual cash value (ACV) of the vehicle minus any applicable deductible,” according to court documents. Plaintiffs alleged that State Farm didn’t accurately determine their vehicles’ ACV because the insurer’s valuation formula includes a “typical negotiation adjustment.”
State Farm filed expert testimony on August 8 from Timothy Sixta, the vice president of product management, global underwriting and North American claims at Solera Holdings. Solera operates Audatex North America, which offers the Autosource program that State Farm uses to calculate ACV. It also owns LYNX Services.
The plaintiffs allege State Farm’s valuation of totaled vehicles using Autosource doesn’t match the cars’ actual cash value.
In his testimony, Sixta says Audatex has valued over 30 million vehicles in the last 30 years, and companies use Autosource to value totaled vehicles in all 50 United States and Puerto Rico, plus all Canadian provinces.
“Regulatory authorities in numerous states have approved of or permitted the use of the Autosource valuation product to value vehicles that are deemed total losses,” Sixta says, claiming no state regulators have “determined that the Autosource methodologies are not compliant with their laws and regulations.”
Sixta explains that Autosource calculates the ACV, which he says is synonymous with “fair market value,” through several steps. Most of this information is redacted in the court document, but the publicly available portions explain why Autosource uses the “typical negotiation adjustment” the plaintiffs are concerned about.
Sixta says Autosource’s database is mostly composed of advertised prices, which are “more readily available” than sales prices.
“By analyzing millions of transactions over time, Audatex has seen that used vehicles are often sold for less than the advertised asking price,” Sixta says. “Since the sales price is the fair market value of that vehicle, [the advertised price is typically] higher than the fair market value of the vehicle.”
Autosource has to account for that discrepancy, he adds.
“To account for this disparity, Autosource adjusts the value of the advertised asking prices of comparable vehicles to account for the difference between the vehicle’s asking price and likely selling price,” Sixta says. “This adjustment is referred to as the typical negotiation adjustment.”
State Farm moved to seal the redacted version of Sixta’s testimony and certain future documents under seal, claiming the “extensive descriptions of the Audatex valuation methodology” reveal proprietary Audatex and Autosource information. At press time, the judge has not yet responded to State Farm’s motion.
