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Insurers Chase Toyota for Policyholder Deductibles


In early 2004, the State Farm Insurance Company filed a complaint with the National Highway Traffic Safety Administration. The insurance company was concerned over an apparent trend in accidents involving Toyota vehicles. Since then, thousands of Toyota vehicles have been recalled due to a dangerous problem discovered in their acceleration systems. Toyota was slow to respond to the problem, which has caused car insurance companies to question the car manufacturer's responsibility for the millions of dollars that have been paid out for accelerator-related problems.

The faulty accelerator system has been blamed for more than 700 accidents and at least 300 deaths. Because of these accidents, car insurance companies have paid out billions of dollars in claims. Consumers have also chipped in a large amount of money toward repairs and medical bills because of deductible payments that were required in the accident settlements. Since the auto manufacturer has accepted responsibility for the faulty design, insurance companies are now seeking reimbursement for the money they have had to pay for claims involving Toyota vehicles that were faulty.

Insurance Customers Would Ultimately Benefit

If the insurance companies are successful in their lawsuits, customers may see the most substantial benefit from a court settlement. Allstate insurance company has said that they will reimburse customers for deductibles that were paid in faulty accelerator accidents. The insurance companies will also benefit from the reimbursement of repair costs and medical bills related to these accidents. State Farm has also announced that insurance customers would be reimbursed in part or in full for deductible payments charged for claims involving Toyota vehicles that had the faulty accelerator installed.

Customers and insurance companies will not see reimbursement money any time soon, however. For the case to be considered, all of the records of each accident involving a Toyota vehicle will have to be examined carefully to determine whether the faulty part could have been responsible for the accident. If there is not clear evidence that the main factor in the accident was the faulty accelerator, the case will have no standing in court. Allstate and State Farm will each need to spend months digging through old claims and evaluating them on a case-by-case basis before they can begin court proceedings.

Toyota Accused of Hiding the Problem

The main argument being brought by the insurance companies is that Toyota knew there was a problem with the accelerators and failed to warn consumers. If the car manufacturer had placed a recall order earlier, there would have been fewer accidents that led to expensive insurance claims. The insurance companies point to many incidents from as long ago as 2004 that involved Toyota accelerator problems. If it can be proven that the manufacturer neglected to inform consumers of a potentially deadly problem in Toyota vehicles, the company could face more than just financial problems. Consumer trust will be sorely damaged if it appears the company intentionally put car owners at risk.

As the Allstate and State Farm cases become better known, it is expected that several other car insurance companies will join the fight. The widespread nature of the Toyota malfunction would indicate that there are dozens of insurance companies that have needed to make large payments for accidents that might have been caused by the faulty equipment. Hundreds of Toyota owners have been involved in accidents due to the accelerator. As more becomes known about a potential Toyota cover-up, insurance companies from across the nation will be interested in recovering the claims they have paid for Toyota-related problems.

Settlements Could Exceed Fine

With just the claims that have been filed so far by Allstate and State Farm, Toyota could be facing a settlement that exceeds the fine they paid to the federal government by millions of dollars. The insurance companies could receive up to $30 million in reimbursements from the automaker. The $16 million that Toyota was fined by the Department of Transportation is pocket change compared to the money the insurance companies are asking for. As more insurance companies join the fight, the possible settlement might soar to levels that could threaten the carmaker's solvency.

Record of Problems

In 2007, State Farm filed a complaint with Toyota regarding a faulty accelerator that caused an accident. In the filing, State Farm mentioned they were aware of a pattern of claims related to accelerator problems in Toyota vehicles. The 2007 State Farm case was settled in Toyota's favor, but it illustrates the possibility that Toyota was well aware of an accelerator problem long before they began their recall efforts. The history of claims based on faulty accelerators is the most damaging element of the car insurance company cases.

Toyota Taking an Aggressive Stance

Toyota is aggressively defending itself from lawsuits regarding the faulty accelerator. They claim they were unaware of a widespread problem with the accelerators. The company also claims that as soon as the problem became known within the company, a recall was issued immediately. Toyota currently faces hundreds of individual claims from Toyota owners who have suffered due to the defective part, as well as these new cases brought by car insurance companies.

The car manufacturer argues these cases should be dismissed because the people bringing the cases cannot point out a specific mechanical part that failed. A recent ruling by the U.S. Supreme Court set a precedent that any case against a manufacturer must prove the defect in the product is a plausible explanation for the damages, not just a possible explanation.

Toyota believes this ruling means that suits filed against them regarding the faulty accelerator must prove there is no other factor involved in the accidents. Since the suits that have already been filed do not point to a specific defect, they do not meet the more stringent requirements of the court. Toyota also claims the local dealerships that sold the cars directly to the consumers should be held responsible in these cases.