Why Millions of Totaled-Car Owners Could Be Owed Money From Their Insurer

• A federal judge in New Jersey ruled on September 8 that GEICO customers cannot pursue a class action over allegedly underpaid totaled-vehicle claims, though the individual driver who sued can still recover on her own claim.
• Insurers including GEICO, Progressive and USAA have separately paid out tens of millions of dollars in recent years to settle claims that they shortchanged drivers on sales tax, title fees and registration costs after declaring a car a total loss.
• Michigan USAA policyholders have until October 8 to file a claim in a $647,263 settlement, and drivers in other states can check for similar open settlements tied to their own insurer.

Why Your Total Loss Check Might Be Short

When an insurer declares a vehicle a total loss, it owes the policyholder the car’s actual cash value, the amount it would cost to replace the vehicle with a comparable one in the same condition. In practice, several major insurers calculate that figure using software from a third-party vendor called CCC Intelligent Solutions, which starts with the average retail price of similar vehicles and then applies upward or downward adjustments based on mileage, options and other factors. Drivers in multiple states have argued in court that those adjustments quietly reduce the payout below what state law and their own policy language require, and that insurers routinely leave out sales tax, title transfer fees and registration costs that should be part of the settlement.

The dispute reached a new stage on September 8, when Chief Judge Renée Marie Bumb of the US District Court for New Jersey declined to certify a class action against GEICO brought by driver Jessica Dinicola-Ortiz. Dinicola-Ortiz alleged GEICO paid her $16,572.47 for her totaled vehicle, an amount she says fell short of its true cash value once the company’s condition adjustment was applied. The court found she can proceed with her own individual claim, but ruled that the broader class, potentially tens of thousands of other New Jersey GEICO customers, cannot be certified: each driver’s underpayment would require separate proof of their specific vehicle’s value.

The Legal Reasoning Behind the Ruling

Judge Bumb leaned on two recent appeals court decisions in reaching her conclusion. A 2024 Third Circuit ruling, Lewis v. GEICO, held that only drivers who actually received less than their vehicle’s true value have standing to sue, even if an insurer’s overall valuation process is flawed. A 2025 decision in a separate Pennsylvania case against Progressive found that courts generally cannot certify a class challenging whether an insurer paid actual cash value, as proving both the vehicle’s true worth and the shortfall requires evidence specific to each driver. Bumb wrote that those individualized questions “eliminate any efficiency gained through a class action,” closing off the class-wide path while leaving the door open for drivers to sue individually.

The practical effect is that a driver who believes their insurer shortchanged them on a total loss now has a harder time joining a large group lawsuit, but the underlying claim, that the payout was too low, remains something an individual can still pursue in small claims court or through a private attorney, particularly in states with clear statutory requirements around sales tax and fee reimbursement.

Settlements Already Paid Out

Even as courts grow more cautious about certifying new classes, insurers have already resolved a string of similar claims through settlements reached before the recent rulings narrowed the path forward. GEICO agreed to pay $33.5 million to Texas policyholders over claims it omitted regulatory fees from total-loss payouts between 2016 and 2024, and separately settled a $6.2 million case covering sales tax owed to leased-vehicle policyholders. Progressive reached a $48 million settlement with New York drivers who alleged the company used third-party valuation software to systematically undervalue their totaled vehicles below the actual pre-accident sales price.

USAA has its own settlement open right now. The company agreed to pay $647,263.74 to resolve claims that it failed to include full sales tax and regulatory fees in payouts for leased vehicles totaled under Michigan policies between January 27, 2015, and March 11, 2026. A federal judge held the final approval hearing for that settlement on September 8, the same day as the GEICO ruling in New Jersey. Eligible Michigan drivers can recover the state’s 6 percent sales tax on their vehicle’s value, plus a $15 title transfer fee and an $8 registration fee, to the extent USAA did not already pay those amounts. The claim form deadline is October 8, 2026, and drivers file through MarchekSettlement.com.

What to Do if You Think You Were Shortchanged

Drivers who had a vehicle declared a total loss, especially a leased vehicle, in the past several years should pull their settlement paperwork and check whether sales tax, title transfer fees and registration costs appear as separate line items in the payout. If those amounts are missing or appear folded into a lower overall number without explanation, that is worth raising directly with the insurer’s claims department in writing: many companies will reprocess a claim once a specific fee omission is identified.

It is also worth checking whether your insurer has an open class settlement in your state through resources like your state insurance department’s consumer complaint page or class-action tracking sites, as new settlements covering additional states and insurers continue to surface while similar lawsuits work through the courts. Filing a complaint with your state’s department of insurance costs nothing and creates a formal record if the underpayment needs to be escalated. For drivers whose vehicle was leased rather than owned, the lease agreement itself often specifies who is entitled to any gap between the insurance payout and the lease payoff amount, which is a separate issue worth reviewing alongside any tax or fee shortfall.

Sources:

• Insurance Journal: GEICO Avoids Class Action Over Totaled Vehicle Payouts in New Jersey
• Top Class Actions: $647,000 USAA Michigan Auto Insurance Class Action Settlement
• ClassAction.org: Total Loss Payout Lawsuits, Missing Sales Tax and Fees