State Farm Chad Arnold Lawsuit: An In-Depth Overview

Nov 06, 2025 0

The case of Arnold v. State Farm Fire and Casualty Co. revolves around allegations that State Farm breached its Alabama insurance policies. This was purportedly done by applying depreciation to the estimated costs of labor and other non-material costs in calculating Actual Cash Value (ACV) payments.

Background of the Lawsuit

The lawsuit, Case No., was a class action brought on behalf of policyholders in Alabama who had filed claims for structural damage between March 8, 2011, and August 3, 2017. These claims involved situations where State Farm applied depreciation to estimated labor and non-material costs.

Annie Arnold, the lead plaintiff, alleged that her home in Selma, Alabama, sustained damage in 2013. A State Farm adjuster estimated the covered loss at $95,720, including labor and material for restoration. The suit highlighted an example where State Farm estimated the cost of gutter replacement at $106 for material and labor but depreciated the labor costs, which the suit claimed was a breach of Alabama law.

Key Allegations

Systematic depreciation of labor costs: The plaintiffs argued that State Farm systematically depreciated the cost of labor and other non-material costs on repairs to insureds’ property between 2011 and 2017.
Breach of contract: The lawsuit claimed that this practice breached the insurance policies.

Class Action Details

In a class action, one or more people called “Class Representatives” sue on behalf of other people who have similar claims. The Plaintiff who sued originally, along with three additional class representatives who were appointed by the Court in this case, are the Class Representatives. One court resolves the issues for all Class Members.

The Court authorized the notice because you have a right to know of a proposed settlement of this class action, including the right to submit a claim for payment as part of the settlement, and about all your options regarding this settlement before the Court decides whether to give “Final Approval” to the settlement.

Read also: Local State Farm Agent: Chad Winn

The class was divided into several groups:

Group A: Settlement Claimants Who Previously Received Only an ACV Payment.
Group B: Settlement Claimants Who Previously Received Partial RCBs.
Group C: Settlement Claimants Who Previously Received Full RCBs.
Group D: Settlement Claimants Who Would Have Received an ACV Payment but For Application of Non-Material Depreciation.

If you have more than one loss during the Class Period of March 8, 2011 through August 3, 2017, you will need to submit a separate claim form for each loss.

Three-Minute Legal Talks: How Class Action Lawsuits Work

Settlement Terms and Approval

The Court granted “Final Approval” of the settlement, and any appeals were resolved in favor of the settlement. Claim Forms needed to be submitted or timely postmarked by October 24, 2022. Policyholders who wanted to object to the settlement had until Aug. 24.

While the exact dollar amount of the settlement agreement was not disclosed, attorneys’ fees for the plaintiffs were capped at about $9 million. This suggests that the total payout may have been roughly three or four times that amount.

Impact on Policyholders

If you submit a claim form but do not qualify for a payment, you will be notified of that determination. Unless you excluded yourself, you are staying in the Class, and that means that you can’t sue or be part of any other lawsuit against State Farm over the legal claims in this case.

“Released Claims” means and includes any and all past, present and future claims arising from or in any way related to depreciation of any kind on claims within the class period (including, but not limited to, calculation, deduction, determination, inclusion, modification, omission, and/or withholding of depreciation), whether known or unknown, and that were asserted or could have been asserted herein to the full extent of res judicata protection.

This release is not intended to prevent an individual Class Member from seeking and potentially recovering any RCBs that may still remain available under the terms of his or her Policy.

Legal Arguments and State Farm's Defense

State Farm denied that its conduct breached the insurance contracts. The settlement does not mean that State Farm did anything wrong. Instead, both sides agreed to settle. That way, the parties avoid the cost of a trial and potentially an appeal, and the people who qualify will get compensation.

Depreciation of Labor Costs

The suit gave this example of the depreciation practice: On gutter replacement State Farm estimated the cost would be about $106 for material and labor. Alabama law allows the insurer to depreciate the value of building materials but does not allow the depreciation of the cost of labor, the suit noted.

The suit said, quoting from Black’s Law Dictionary, obsolescence and age. “As such these are assets that can be depreciated. In contrast, labor is not susceptible to aging or wear.

Related Cases and Accusations

This is not the first time State Farm has been accused of artificially reducing claims payments. State Farm instructed its valuation estimators to include the adjustment, which reduced the payout by 4% to 11%, the suit argues. In Georgia, the state insurance commissioner last spring directed auto insurers to stop under-calculating tax amounts for totaled vehicles.

Another Case: Estate of Susan Ballard et al. v. State Farm Fire and Casualty Co.

In a separate case, the Estate of Susan Ballard et al. v. State Farm Fire and Casualty Co., an appeal was filed concerning a breach of contract claim related to a homeowner’s insurance policy. The insurer filed a motion for summary judgment which the trial court initially denied, having determined that there were issues of material fact in dispute.

The Tennessee Court of Appeals reversed the trial court’s judgment, concluding that there were disputed issues of material fact such that summary judgment should not have been granted.

Key points from this case:

Policy Cancellation: State Farm sent the Ballards a cancellation notice for nonpayment on approximately June 5, 2018, listing June 22, 2018, as the cancellation date.
Disputed Reinstatement: The Ballards claimed that an employee at the Fleming State Farm office promised to backdate the Ballards’ coverage back to June 22, 2018, if they sent a payment by July 20, 2018.
Fire Incident: On July 19, 2018, a fire rendered the Residence a total loss. State Farm refused to cover the loss, stating that the incident took place after cancellation of the policy.

The court found that there were disputed issues of material fact as to whether the policy was in effect on the date of the loss.

Conclusion

The State Farm Chad Arnold lawsuit highlights the complexities and potential disputes that can arise between insurance companies and policyholders. The settlement reached in this case aimed to compensate Alabama policyholders who may have been affected by State Farm's depreciation practices. These cases underscore the importance of understanding insurance policies and seeking legal advice when disputes arise.