The Sixth Circuit Court of Appeals has granted an en banc rehearing of a potential class action lawsuit against State Farm Automobile Insurance Co.
The case that could have significant implications for how insurers across the United States calculate total loss vehicle valuations as algorithmic decision-making faces growing legal scrutiny.
It centers on allegations that State Farm systematically undervalues vehicles classified as total losses through the application of a "Typical Negotiation Adjustment," or TNA – a discount applied to the advertised prices of comparable vehicles on the premise that most dealership customers negotiate lower prices than listed on the sticker.
According to court documents, the market valuation report in the Clippinger case applied a TNA of approximately 8.5% to comparable vehicles without itemizing or explaining the basis of the adjustment.
The Sixth Circuit had previously affirmed class certification in October 2025 in Clippinger v. State Farm. The certified class covers Tennessee policyholders who, from May 8, 2019, received compensation for a totaled vehicle based on an Audatex appraisal where the actual cash value was reduced by a TNA.
Lead plaintiff Jessica Clippinger alleged the adjustment did not reflect current market practices and resulted in lower settlements.
She argued that due to online shopping and price transparency, used cars often sell for their advertised prices rather than below asking price – and that State Farm's own data supported this view.
In court filings, State Farm argued that a rehearing was necessary, contending that the Sixth Circuit's earlier ruling made it an outlier that could turn the court into a "magnet for sprawling classes that could not be certified elsewhere."
The insurer pointed to similar proceedings in other jurisdictions to support its position. Progressive Preferred Insurance Co. faced comparable allegations before the Ninth Circuit, which declined to certify the class. The Third, Fourth, Fifth, and Seventh Circuits have similarly declined certification in cases involving similar claims.
State Farm raised concerns about the practical implications of the original ruling, arguing that if the previous decision stands, the court would face a choice between litigating approximately 90,000 individual claims or barring the insurer from presenting evidence on the fair value of each vehicle assessment – either outcome, it contended, would violate its right to due process.
State Farm faces similar lawsuits in Alaska, Illinois, Kentucky, Mississippi, North Carolina, and West Virginia – each arguing that the insurer's automated pricing models produce artificially low payouts.
The US Chamber of Commerce has filed a coalition amicus brief urging the Sixth Circuit to deny certification, arguing that individual valuation issues predominate.
The outcome may influence how insurers in Tennessee and elsewhere approach the calculation and explanation of actual cash value in auto claims.
In an emailed statement, State Farm said it appreciates the court's decision to reconsider this matter. The full Sixth Circuit is scheduled to hear oral arguments on March 18.
