State Farm, Kentucky Reach $1.35M Settlement

State Farm, the largest U.S. auto insurer by market share, and the Kentucky attorney general’s office have reached a settlement over allegations that the insurer failed to adequately inform customers about available uninsured/underinsured motorist coverages.

Under the agreement, State Farm will pay $1.35 million to reimburse the commonwealth for the cost of its investigation into the allegations, according to a press release from Attorney General Daniel Cameron’s office.

Allegations against State Farm

As early as 2018, State Farm discovered that some of its claims representatives failed to disclose to policyholders with auto claims UM/UIM coverage available to them, according to the settlement agreement. In 2019, the attorney general’s office opened an investigation into the issue.

That year, State Farm voluntarily issued additional payments to affected claimants.

The state also alleged that some State Farm agents declined UM/UIM coverage on behalf of policyholders without confirming the customers didn’t want the coverage. While Kentucky doesn’t require drivers to carry UM/UIM coverage, it does require insurers to offer it and confirm that policyholders have declined the coverage if they don’t want it.

In 2019, State Farm reached a settlement in a class-action lawsuit on the coverage issue.

State Farm’s remediation steps

Ultimately, State Farm learned that an employee at a Louisville, Kentucky, agency had signed UM selection/rejection forms without policyholder authorization. The employee was fired, and the agent retired, according to the settlement.

State Farm provided affected policyholders with free UM coverage at limits equal to their policy’s liability limits through the term of their current policy. It also sent letters to other policyholders of the Louisville agent asking them to confirm in writing whether they wanted or rejected the coverage.

What’s next

Both the settlement agreement and the attorney general’s press release acknowledge that State Farm was cooperative and acted in good faith throughout the investigation. The agreement is not an admission of liability or wrongdoing, the attorney general’s office said.

Additionally, State Farm has “strengthened its notification policies, trained staff on revised claim procedures, and implemented a database search tool to identify available coverages under household automobile insurance policies,” the attorney general’s office reported.

The insurer will also aim to begin offering multi-car insurance policies in Kentucky.

“I’m grateful to State Farm for working with us to come to a fair resolution and for taking concrete steps to ensure something like this does not happen again,” Cameron said.