A federal appeals court has allowed a class action to proceed against State Farm over its method for calculating total loss auto claims in Tennessee.
The case focuses on State Farm’s use of the “Typical Negotiation Adjustment” (TNA) when determining the actual cash value of totaled vehicles for Tennessee policyholders. State Farm relied on valuations from Audatex, a third-party company, and applied the TNA to reduce payouts based on the assumption that buyers typically negotiate lower prices than those advertised.
Lead plaintiff Jessica Clippinger alleged that the TNA did not reflect current market practices and resulted in lower settlements than policyholders were entitled to under their insurance contracts. She argued that, due to online shopping and price transparency, used cars often sell for their advertised prices. The lawsuit claims that State Farm’s use of the TNA breached its contracts and violated Tennessee law.
State Farm’s standard Tennessee auto policy provides for payment of the “actual cash value” of a totaled vehicle. If there is disagreement about the value, the policy allows either party to request an appraisal, with each side selecting an appraiser and a third chosen if needed. Tennessee regulations set out permissible methods for determining actual cash value but allow insurers discretion in the approach used.
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 decreased by a TNA.
State Farm argued that individual circumstances would predominate and that the TNA was a reasonable adjustment. The Sixth Circuit found that whether the TNA resulted in an artificially reduced payout in breach of contract could be addressed for the class as a whole.
The October 9, 2025, decision does not resolve whether State Farm’s use of the TNA was lawful or a breach of contract. Instead, it affirms class certification and remands the case for further proceedings.
The case highlights the importance of claims valuation methods and regulatory compliance. The outcome may influence how insurers in Tennessee and elsewhere approach the calculation and explanation of actual cash value in auto claims.
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