State Farm Defeats Class Action Claim Over Xactimate Estimates in Pennsylvania

State Farm has secured a dismissal of a proposed class action filed by Pennsylvania homeowners who alleged that the insurer undervalued their fire damage claims through the use of Xactimate software. The plaintiffs, Jamie and Becky Belotti, claimed that State Farm improperly used Xactimate’s ‘new construction’ settings rather than its ‘repair/reconstruction’ settings, resulting in a lower damage estimate. However, the court found that the policy did not require the insurer to use a particular method or software setting to calculate losses.

The dispute stemmed from a fire loss at the Belottis’ home in Duryea, Pennsylvania, where the parties were initially $200,000 apart in their estimates. The disagreement triggered an appraisal process, as outlined in the homeowners’ policy. Ultimately, both appraisers reached a consensus on a higher replacement cost than State Farm’s original estimate, and State Farm paid the difference. The plaintiffs still pursued legal action, claiming bad faith and breach of contract, among other accusations.

Judge Joseph F. Saporito, Jr., ruled in favor of State Farm, emphasizing that the insurance policy language did not stipulate any required computation method. He also rejected the plaintiffs’ claims of ambiguity and bad faith, noting that the insurer complied with the appraisal outcome and policy terms. The judge concluded that using different estimation tools or models did not equate to wrongdoing.

While this case ended in State Farm’s favor, the insurer has faced similar legal challenges over estimation practices in other states, including a dismissal in California and a settled dispute in Indiana. These cases highlight ongoing debates around loss calculation methods, but in this instance, the policyholder’s arguments did not hold up in court.