The State Farm homeowners depreciation lawsuits are a series of class actions accusing the insurer of underpaying property damage claims by depreciating costs that plaintiffs say should not have been depreciated: labor, sales tax, and general contractor overhead and profit. Settlements have already been reached in Kentucky, Alabama, Illinois, and Missouri, returning tens of millions of dollars to policyholders. The largest active case, Pitkin v. State Farm, was certified in July 2025 as a 200,000-member class in California and is scheduled for trial on September 8, 2026.
What State Farm Is Accused of Doing
Homeowners policies typically pay a claim in two steps. The insurer first pays the actual cash value of the loss, which is the cost to repair or replace the damaged property minus depreciation for wear and tear. After the homeowner completes repairs, the insurer pays the remaining difference up to the replacement cost.
The fight in these cases is about what can be depreciated in that first payment. State Farm has used estimating software that breaks repair costs into materials, labor, sales tax, and contractor overhead and profit, then applied depreciation across those categories. Plaintiffs argue that depreciation logically applies only to physical materials that wear out. Labor does not deteriorate. Neither does sales tax or a contractor’s fee. Reducing the initial payment by depreciating those line items, the argument goes, shorts the policyholder on money they are owed.
Pitkin v. State Farm: The Active California Case
Melissa Pitkin, et al. v. State Farm Fire and Casualty Company was filed on March 1, 2023, in the U.S. District Court for the Northern District of California. The named plaintiffs lost property in the 2020 Walbridge Fire in Sonoma County. They allege State Farm violated California Insurance Code § 2051(b) by depreciating sales tax when calculating actual cash value.1Policyholder Pulse. Pitkin v. State Farm Class Certification Order
California law limits the physical depreciation deduction to “components of a structure that are normally subject to repair and replacement during the useful life of that structure.”2Justia. California Insurance Code Section 2051 Sales tax, plaintiffs argue, is a government charge and not a physical component that wears out.
Who Is In the Class
On July 15, 2025, Judge William Orrick certified a class of roughly 200,000 California homeowners.3The Insurer. California Judge Certifies 200,000 Class in State Farm Underpayment Suit The class covers California policyholders who, between March 1, 2019, and July 15, 2025, held a State Farm property policy, suffered a covered loss, and received an actual cash value payment reduced by depreciation of sales tax, so long as they were paid less than their policy limits.4SF Sales Tax Depreciation Lawsuit. Pitkin v. State Farm Class Action Settlement Website Membership is not limited to Walbridge Fire victims.
Deadlines and Trial Date
Trial is set for September 8, 2026. Class members who want to opt out and preserve the right to sue separately must exclude themselves by May 28, 2026.4SF Sales Tax Depreciation Lawsuit. Pitkin v. State Farm Class Action Settlement Website The court has not decided the merits.
Settled State Cases
Kentucky — Hicks v. State Farm
Hicks v. State Farm Fire and Casualty Company challenged labor depreciation on dwelling claims. On one plaintiff’s 2014 fire loss, State Farm estimated a replacement cost of about $206,000 and withheld more than $40,000 for depreciation of materials, labor, overhead, and profit.5United Press of Help. 6th Circuit Approves Class Action for KY Underpayments by State Farm Federal courts held that a reasonable Kentucky policyholder would read “depreciation” to reach only materials, and the Sixth Circuit affirmed class certification on July 10, 2020.6United States Court of Appeals for the Sixth Circuit. Hicks v. State Farm Fire and Casualty Co.
The class covered roughly 65,575 Kentucky policyholders who received depreciated payments between February 28, 2004, and July 25, 2015. Final settlement approval came on April 28, 2022, with $7.76 million made available to the class and $1.9 million in attorneys’ fees paid separately by State Farm.7KCContent. Declaration of Class Counsel in Support of Final Approval
Alabama — Arnold v. State Farm
Arnold v. State Farm Fire and Casualty Company covered Alabama structural damage claims with dates of loss between March 8, 2011, and August 3, 2017.8Arnold v. State Farm. Arnold v. State Farm Settlement Website Final approval was granted on October 4, 2022. Eligible class members were entitled to 100% of their withheld labor depreciation.9Justia. Arnold v. State Farm Fire and Casualty Company Co-class counsel estimated the total settlement value above $38 million, with State Farm separately paying $8.595 million in fees and costs.10McWherter Scott & Bobbitt. Case Results Settlement checks were mailed in December 2023.
Illinois — Sproull v. State Farm
Sproull v. State Farm Fire and Casualty Co. attacked labor depreciation on structural damage claims. The Illinois Supreme Court ruled on September 23, 2021, that when a homeowners policy does not define “actual cash value,” the insurer may not reduce payment by depreciating labor, because labor “is not logically depreciable.”11Clausen Miller. Court Finds Against Labor Decline on Actual Cash Value Payment
A class settlement followed, covering Illinois policyholders whose structural claims had labor or general contractor overhead and profit depreciation withheld. The Madison County Circuit Court approved the settlement on September 28, 2023, and the claim filing deadline was October 28, 2023.12Sproull v. State Farm. Common Questions Distribution has been contingent on the resolution of any appeals.13Sproull v. State Farm. Sproull v. State Farm Settlement Website
Missouri — Pregon v. State Farm
Pregon v. State Farm Fire and Casualty Company covers Missouri structural damage claims with dates of loss between June 5, 2012, and approximately October 2017.14KCContent. Pregon v. State Farm Stipulation and Settlement Agreement Payments follow a tiered formula:
- Policyholders who did not recover full replacement cost benefits receive 90% of the withheld non-material depreciation plus 50% of the withheld general contractor overhead and profit, plus 8.9% simple annual interest from August 6, 2021.15Pregon v. State Farm. Frequently Asked Questions
- Policyholders who did recover full replacement cost benefits receive 8.9% simple annual interest on the amounts initially withheld and later paid back, calculated from the initial payment through the final payment.15Pregon v. State Farm. Frequently Asked Questions
- Policyholders whose claims fell below their deductible because of the depreciation receive 90% of non-material depreciation and 50% of overhead and profit depreciation that caused the shortfall, plus 8.9% interest.15Pregon v. State Farm. Frequently Asked Questions
The claim filing deadline was April 2, 2026, and the final approval hearing was held on March 3, 2026.16Pregon v. State Farm. Pregon v. State Farm Settlement Website
Whether You Can Still Act
If you are a California policyholder whose sales tax was depreciated between March 1, 2019, and July 15, 2025, you are automatically part of the Pitkin class unless you opt out by May 28, 2026. There is no claim form to file now; the case is heading to trial.
The Kentucky, Alabama, Illinois, and Missouri settlements have all passed their claim filing deadlines. If you missed one and believe you were affected, contact the relevant settlement administrator through its official website to confirm your status.
The Broader Trend
State Farm is not the only insurer facing this theory. A settlement against Safeco in Missouri, Scott v. Safeco Insurance Co. of America, involved at least $11.3 million for policyholders with non-material depreciation withheld between 2012 and 2022.17ClaimDepot. Scott Safeco Depreciation Settlement Another, No Joke, Inc. v. West Bend Mutual Insurance Company, received final approval in January 2026 and covered policyholders across seven states.18No Joke Depreciation Settlement. No Joke Depreciation Settlement
State Farm has denied wrongdoing in every case and maintains its payment practices comply with its policies and the law.16Pregon v. State Farm. Pregon v. State Farm Settlement Website No labor depreciation class action against any insurer has gone to trial; every one has settled.7KCContent. Declaration of Class Counsel in Support of Final Approval The California sales tax case could be the first.