State Farm is facing a proposed class-action lawsuit that accuses the nation’s largest auto insurer of systematically underpaying thousands of total loss claims by applying a percentage discount to the value of comparable vehicles to account for ‘typical negotiation.’

The plaintiffs accuse State Farm of conducting a ‘blatant and unlawful scheme’ by directing its third-party data provider to apply ‘a deceptive, arbitrary and baseless ‘typical negotiation adjustment’’ to its researched values.

The across-the-board adjustment of 4-11% applied to used vehicles’ internet prices, used in setting actual cash value (ACV), ‘is based on no negotiations, typical or otherwise, and does not reflect market realities,’ the suit states.

‘This sliding percentage scale does not reflect ‘actual value’ of the vehicle … or any ‘typical negotiation,’ but rather is meant to ensure that Defendant’s total loss payments are significantly reduced,’ the suit states.

It claims that the practice is not allowed under State Farm’s own policy language, nor under relevant state insurance laws and regulations.