Attorney General's News Release

January 10, 2005

Multi-state agreement with State Farm Insurance will result in $40 million paid to consumers nationwide

Jefferson City, Mo. — Hundreds of vehicle owners in Missouri will be among the estimated 30,000 consumers nationwide who may be eligible to share in $40 million compensation from State Farm Mutual Insurance Co., Attorney General Jay Nixon said today. Nixon and the Attorneys General of 48 other states and the District of Columbia reached an innovative agreement with State Farm to resolve a problem with thousands of cars, SUVs, and trucks not being properly titled as salvage.

Nixon said the agreement resulted after State Farm approached the states and indicated its own internal review showed that in a small percentage of cases, it was unable to confirm that it had properly titled vehicles it had taken ownership of from policyholders due to damage or theft. In most states, depending on factors such as vehicle age and extent of damage, insurance companies taking ownership in such situations must obtain "branded titles," indicating the vehicles are "salvage" or "damaged."

State Farm's records showed that while it had properly titled approximately 2.4 million vehicles in recent years that may have required a branded title, the company could not confirm whether a much smaller number may not have been properly titled.

Payment will go to the current owners of vehicles that may require branded titles. The owners of those vehicles in Missouri will receive a letter from Nixon's office with a claim form to complete and return to an independent claims administrator company already approved by the states to administer the notification and compensation program.

"State Farm did the right thing in disclosing the problem and presenting a viable solution," Nixon said. "This groundbreaking agreement can serve as an example to other companies to step forward when necessary, take responsibility, improve practices, and make things right for consumers."

Nixon said titling research would determine which consumers may be eligible for payments, which could range from about $400 up to more than $10,000, depending on the current average value of the vehicle, and the number of consumers who participate in the compensation program. The states believe most payments are likely to range from $800 to $1,850.

In addition to the $40 million for consumers, State Farm also will pay the expense for the major project of identifying the vehicles, tracing the current owners, contacting owners, taking claims from owners, and making compensation payments. In the agreement with the states, State Farm also makes assurances about how it presently conducts its practices, as well as in the future.

Nixon said that consumers who complete a claim form and are approved will receive a compensation payment from State Farm later this year or early 2006. Under the agreement, State Farm will work with state departments of motor vehicles in the coming months to determine the specific vehicles which require a branded title.

The final amounts received by consumers will depend on the current value of their vehicle and how many consumers elect to participate in the payment program. Payments will be made to the owners of currently registered vehicles and will be based on the current average retail value of the vehicle.

Nixon said it is expected that current owners of eligible vehicles will be contacted by this fall, after the identification process is completed.

State Farm also is paying $1 million to be divided among the states for consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Press Secretary.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818