State Farm settlement
includes Hawaii

ALBANY, N.Y. » Thousands of automobile owners nationwide, including Hawaii, will share in a $40 million settlement with State Farm Mutual Insurance Co. over the company's handling of titles to vehicles totaled in accidents.

About 30,000 consumers nationwide may be eligible for payments ranging from $400 to $10,000, depending on the value of their vehicle. Most payments will be between $800 and $1,850, officials said.

The settlement includes Hawaii, 48 other states and the District of Columbia. Only Indiana opted out of the settlement because State Farm had an agreement there more than a year ago, said company spokesman Fraser Engerman.

The case began after State Farm approached the states and indicated that, after an internal review, it couldn't confirm that it had properly titled vehicles it had assumed after damage or theft, said Iowa Attorney General Tom Miller.

In most states, insurance companies taking ownership of vehicles in such situations must declare on the title whether the car was "damaged" or is "salvage." That means future purchasers of the vehicle if rebuilt would know it was listed as a total loss in an accident, a fact that can affect its value, said Christine Pritchard, a spokeswoman for New York Attorney General Eliot Spitzer.

State Farm's records showed that it had properly titled about 2.4 million vehicles in recent years, but that a smaller number were not properly titled. Iowa law, for example, requires a full disclosure statement of prior salvage history.

"Most of those vehicles are no longer on the road," Engerman said.

State Farm Vice President Jeffrey W. Jackson said his company is serious about meeting its legal requirements.

"The agreement made by State Farm and the attorneys general is the right thing to do for our policyholders and the public."

"It is rare that a company comes to us, discloses a problem, and presents a very viable solution to correct the problem and help consumers," Miller, the Iowa AG, said a statement. "We hope this agreement will encourage other companies to step forward when necessary, take responsibility, improve practices, and make things right for consumers."

The company is working with state motor vehicle departments to determine who will receive compensation for buying a car they didn't realize had been in a serious accident.

Current owners eligible for compensation will be contacted by a third-party administrator by the fall, authorities said. Consumers should receive the payment later this year or in early 2006.

State Farm will also pay $1 million for consumer education, future consumer litigation, public protection, local consumer aid funds, and attorney fees and costs.