(KRON) — District Attorney Pamela Price is suing multiple car insurance companies, including Progressive and the United Services Automobile Association (USAA), and their affiliated software developers.

The lawsuit alleges both parties worked together to create and use valuation software to systematically undervalue “totaled” vehicles and pay insurance consumers less than the actual value owed under the policies, the Alameda County DA announced on Thursday.

The civil complaint alleges this undervaluation scheme violates numerous California laws and demands civil penalties, restitution for California consumers, injunctive relief, and associated fees and costs.

“Many residents live paycheck to paycheck and go deeply into debt just to buy a car,” DA Price said. “When an insurance company underpays its customers for a totaled vehicle… That can lead to job losses and even homelessness.”

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The 69-page complaint filed on April 26 alleges that multiple car insurance companies — including the Progressive Corporation (“Progressive Insurance”), USAA and its affiliates — owed “duties of good faith and fair dealing to hundreds of thousands of California residents and businesses each year,” the complaint said.

Despite these legal duties, the complaint alleges the insurance companies use specially designed car valuation software to undervalue totaled cars to pay owners less money than they are owed, the complaint said.

The complaint further alleges that the software developers (including CCC Information Systems
and Mitchell International) worked with these insurance companies to build the means to lower the reported “actual cash value” of the totaled vehicles and that the modified software is sold exclusively to automobile insurance companies.

After reporting the actual cash value, the insurance companies then allegedly made “lowball” settlement offers to their customers and “refused to negotiate in good faith,” relying on the “independent” software-generated actual cash value, the complaint said.

Once the insured owner accepts the lowball offer, the insurance companies can allegedly resell the same car at auction to minimize its losses further, the complaint said.

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The complaint believes the scheme impacts all Californians, but more specifically, seniors and veterans.

The complaint alleges that the scheme impacts California businesses as well, including:

1. Car manufacturers and dealers (by systematically lowering the market value of their vehicles)

2. Gap insurance providers (whose “gap insurance” policies must make up the difference between an outstanding loan amount and an undervalued amount paid)

3. Car loan institutions (i.e. when underpaid car owners can no longer pay their car loans)

4. Car repair facilities (that lose out on potential repair business when vehicles are systematically totaled instead of repaired)

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“Public safety includes protecting consumers from powerful companies that seek only to
maximize profits,” Price said. “We are seeking to level the playing field for vehicle owners who face what looks like a rigged game when their car or truck is totaled because a loss of a vehicle can destabilize a person’s life.”

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