With product-liability and wrongful-death lawsuits against Toyota beginning to mount, insurance companies are trying to recoup their losses -- and that could mean refunds for policyholders who made claims that can be traced to gas-pedal problems.
Toyota has recalled roughly 7.8 million vehicles for potential problems with sudden, unintended acceleration related to the gas pedal sticking or being trapped by a floor mat.
State Farm, the nation's largest auto insurer, confirmed Monday that it has started the process of subrogation -- seeking reimbursement from those at fault to cover claims it has paid to its customers. Allstate, the second-largest insurer, also said it has begun the process, and industry insiders say most other insurance company are probably doing the same thing.
"This is a normal operating procedure for insurance companies," says Pete Moraga, a spokesman for the Insurance Information Network of California.
On Tuesday, Consumer Reports magazine announced that it would urge consumers to avoid the redesigned 2010 Lexus GX 460, a sport-utility vehicle made by Toyota's luxury division.
The magazine said the tail of the SUV swung so far out during its emergency-handling tests that it would be more prone to hit a curb or leave the pavement, causing a rollover. The SUV's electronic stability control system, the magazine said, didn't intervene quickly enough to prevent an accident. (Later Tuesday, Toyota said it would temporarily halt sales of the vehicle in response to the magazine's report.)
The last vehicle to receive a "Don't Buy: Safety Risk" designation from Consumer Reports was the 2001 Mitsubishi Montero SUV.
Revisiting accident claims
The subrogation process typically plods along unnoticed by insurance customers, but Toyota is likely to be hit hard by multiple efforts as it faces not only hundreds of lawsuits but reinvestigation of accident claims."The great thing for consumers is that they may be able to recoup their deductible," Moraga says. "Consumers may find that surprising."
If the subrogation process is resolved in your insurance company's favor -- meaning that Toyota pays for all the accidents that insurers link to the sudden-acceleration problem -- you will likely receive a refund on your deductible if you filed a claim related to this problem.
But don't spend your refund yet. Subrogation cases can take years. Some insurance companies may send a letter to notify customers of their possible entitlement to a refund at the start of the subrogation process, Moraga says. Others may wait until the subrogation process has ended and mail customers a letter of explanation with a check.
Worried about higher rates?
Currently, there's no evidence that claims related to Toyota's gas pedals have affected rates for Toyota owners. And with so many Toyotas on the road, it would take a significant number of claims to affect premiums.State Farm notified Toyota as early as 2007 that it had seen a rise in claims involving unintended acceleration on its models. Overall, though, rates on Toyotas remain comparatively low.
That's because an insurance premium is calculated only partly based on the type of car you drive (the model's claims record). Other factors include your driving record, claims and credit history, age, gender, the type of car insurance you buy and where you live. If your car model is associated with a higher-than-average number of claims every year -- for any reason -- it's likely to jack up your insurance premium.
It may take years to know if Toyota's recall will have any an impact on insurance premiums. For that to happen, insurers would have to receive a huge influx in claims for the recalled makes and models -- and fail to collect on subrogation efforts.
Toyota already has announced that parts to reinforce the recalled gas pedals are being shipped to dealers and that dealer training is under way.
This article was reported by Kat Zeman for Insure.com.
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