State Farm Examines Toyota Claims For Subrogation

NU Online News Service, Feb. 9, 11:31 a.m. EST

State Farm said it is considering subrogation action against Toyota for auto claims that occurred due to vehicle defects that have been the subject of a major recall of Toyota vehicles.

The Bloomington, Ill.-based insurer told USA Today it had notified the National Highway Traffic Safety Administration about possible acceleration issues in Toyota and Lexus models back in 2007.

Kip Diggs, State Farm spokesman, told NU Online that subrogation is an option for the insurer if it can show that the product was in part or fully to blame for a given auto claim.

Last week, Allstate said as part of its standard process on recalls it would be looking at accident claims on the affected Toyota automobiles, and Mark Bunim, president and chief executive of Case Closure, a New York-based insurance arbitration and mediation firm, told NU Online he would expect all large auto insurers would examine claims involving Toyotas over the past five or six months to see how many are tied to or could be tied to the gas pedal recall.

"Then they are going to try and subrogate. And why not?" Mr. Bunim said.

Speaking for State Farm, Mr. Diggs said it is too soon at this point to have started the subrogation process on any specific auto claim, but he said subrogation is something that is standard within the industry and would be a consideration going forward.

"Any time a claim is filed, that's one of the things we look at--to see if there is a subrogation issue there," Mr. Diggs said.

Regarding the Toyota recall specifically, he said, "[Subrogation] is something that we're considering."

Meanwhile, the Property Casualty Insurers Association of America (PCI) said the recall should not result in higher insurance rates for Toyotas.

"Looking forward, it is unlikely that rates would be affected by the recall," said Robert Passmore, senior director of claims for PCI.

"Over the years Toyotas have developed a good safety record as evidenced by the popularity of their vehicles, so it is unlikely that there will be enough accidents caused by the faulty pedals that rates will increase. Insurers look at the cost of claims over a period of time for a vehicle. They are interested in how much it costs to repair a vehicle and how often the vehicle is involved in an accident, he said in a statement.

He further advised that owners of Toyota vehicles follow the manufacturer's instructions regarding the recall and contact a dealer without delay if they have any accelerator pedal issues.

Mr. Passmore said, "In the rare occurrence where the recalled part causes an accident, the driver's automobile liability or physical damage insurance will provide coverage."

And he said, "If the pedal is a factor, the insurer will pay the claim for the driver and then likely seek to be reimbursed by Toyota."

Actual legal actions against the carmaker on behalf of persons injured or killed from defects have been mounting and The Law Journal noted more than a dozen class actions alleging Toyota failed to properly disclose mechanical problems. It also said shareholder suits were likely to argue the company's stock value had fallen as a result of the negative publicity.

Also today, A.M. Best Co. said that for now it is making no change in the Toyota Motor Insurance Company in Cedar Rapids, Iowa financial strength rating of A minus (Excellent) and insurer credit rating of "a minus" and stable outlook .

"In light of the recent recalls surrounding Toyota Motor Corporation, the ultimate parent of Toyota Motor Insurance Company, A.M. Best remains neutral and will monitor the developments of the situation on an ongoing basis," the Oldwick, N.J.-based firm said.

About the Author
Phil Gusman, PropertyCasualty360.com

Phil Gusman, PropertyCasualty360.com

Phil Gusman is Managing Editor of PropertyCasualty360.com. Prior to joining National Underwriter in 2008, he was Editor of Insurance Advocate. Gusman has also served as Associate Editor of Crackdown!, an insurance fraud publication, and Assistant Editor of Empire State Report, which covers New York politics. He graduated in 2002 from Plattsburgh State University in New York. Gusman may be reached at pgusman@summitpronets.com. Follow him on Twitter: pgusman and PC360_Markets

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