Homeowners in several states have filed class action lawsuits against State Farm alleging that the insurer used Xactimate — the estimating software that dominates the property claims industry — to systematically underpay damage claims. The results have been mixed. Policyholders won a certified class and settlement in Kentucky over improperly depreciated labor, and Missouri policyholders secured a settlement valued at roughly $25 million over depreciation practices. But cases challenging State Farm’s choice of Xactimate’s “new construction” pricing setting have largely been dismissed, and older antitrust theories tied to Hurricane Katrina and California wildfires never survived the pleading stage.
Why the Xactimate Settings Are the Fight
Xactimate, produced by Verisk subsidiary Xactware, lets adjusters sketch a damaged property, apply regional pricing from databases covering more than 460 geographic areas, and generate a repair estimate.1Verisk. Xactimate It has become close to a shared language among insurers, contractors, and public adjusters.2Pacesetter Claims. What Is Xactimate
The lawsuits do not attack the software itself so much as the choices adjusters make inside it. Two settings have driven most of the litigation: whether labor is depreciated alongside materials when calculating actual cash value, and whether repairs to an existing damaged home are priced using the “new construction” labor efficiency setting or the higher “restoration/service/remodel” setting. Consumer group United Policyholders has argued that Xactimate was built around tract-style homes, uses median pricing that can lag the market, and produces authoritative-looking estimates that are hard for homeowners to challenge without a competing Xactimate estimate of their own.3United Policyholders. Xactimate Demystified
Kentucky: Hicks v. State Farm and the Labor Depreciation Class
The clearest policyholder win came in Hicks v. State Farm Fire & Casualty Co. Between 2004 and 2015, State Farm used an Xactimate setting that automatically depreciated both materials and labor when calculating actual cash value on Kentucky claims. Kentucky courts have held that labor, unlike materials, does not lose value over time, so it cannot be depreciated.4United Policyholders. 6th Circuit Approves Class Action for KY Underpayments by State Farm Plaintiffs’ attorneys pointed out that stopping the practice required nothing more than unchecking a single box in the software.5American Adjuster Association. Class Action Lawsuit Triggered by Xactimate Error
The dollar figures for individual class members were substantial. Named plaintiff Susan Hicks had more than $60,000 deducted for depreciation on a 2014 house fire claim, and co-plaintiff Don Williams had over $40,000 deducted after his own fire loss. The certified class covered an estimated 65,575 Kentucky policyholders.4United Policyholders. 6th Circuit Approves Class Action for KY Underpayments by State Farm
On July 10, 2020, the Sixth Circuit affirmed class certification.6U.S. Court of Appeals for the Sixth Circuit. Hicks v. State Farm Fire & Casualty Co., No. 19-5719 The district court granted preliminary settlement approval on November 8, 2021. Class members who received only an actual cash value payment were entitled to 100% of the improperly withheld labor depreciation plus 5% simple interest. State Farm agreed to pay $1.9 million in attorneys’ fees and $15,000 service awards to each named plaintiff, on top of — not out of — the class recovery.7GovInfo. Hicks v. State Farm, Settlement Preliminary Approval
The ruling is Kentucky law. State rules on labor depreciation vary: California forbids it outright, while the Eighth Circuit and a federal court in Ohio have allowed it.4United Policyholders. 6th Circuit Approves Class Action for KY Underpayments by State Farm
Missouri: The Pregon Depreciation Settlement
A separate Missouri class action, Pregon v. State Farm Fire and Casualty Co. (Case No. 24SL-CC03130), produced a settlement valued at approximately $25 million. It resolved claims that State Farm improperly deducted “non-material depreciation” and “general contractor overhead and profit depreciation” from actual cash value payments on structural damage claims with loss dates between June 5, 2012, and October 2017.8ClaimDepot. Pregon v. State Farm
Eligible class members could recover 90% of the deducted non-material depreciation and 50% of the deducted general contractor overhead and profit depreciation, plus 8.9% simple interest running from August 6, 2021. Class counsel’s fees were capped at $5,125,000, and the class representative’s service award was set at $7,500.9Pregon v. State Farm Settlement Website. FAQ The claims deadline was April 2, 2026, administered by JND Legal Administration.10Pregon v. State Farm Settlement Website. Pregon v. State Farm Settlement As of mid-2026, the fairness hearing date had passed, but publicly available information did not confirm whether a final approval order had been entered.
The “New Construction” Setting Cases
A second wave of lawsuits took aim at a different Xactimate setting. Adjusters can price a job using either the “new construction” labor efficiency setting, designed for building from the ground up, or the higher “restoration/service/remodel” setting, meant for work on existing damaged structures. The complaints allege State Farm defaulted to the cheaper new-construction pricing on repair jobs, producing artificially low estimates. So far, this theory has not fared well.
Belotti v. State Farm (Pennsylvania)
In Belotti v. State Farm Fire and Casualty Company (Case No. 3:22-cv-1284), Pennsylvania homeowners brought breach of contract and bad faith claims in the Middle District of Pennsylvania. On March 25, 2025, Judge Joseph F. Saporito Jr. granted State Farm summary judgment on every claim. He found that the policy contained no language requiring any particular estimating method. “The language of an insurance policy should not be stretched beyond its plain meaning to create ambiguous terms,” the judge wrote, holding that the policy was “wholly independent from a method of computation.”11Insurance Journal. Federal Judge Dismisses Class Action Over State Farm Xactimate Estimates in Pennsylvania
The court also rejected bad faith. After the Belottis disputed State Farm’s estimate, the insurer participated in the policy’s appraisal process and paid the higher appraised figure. That, the court said, was “the intended function of the appraisal process,” not evidence of bad faith.12Dykema. Belotti v. State Farm Fire & Cas. Co., 2025 U.S. Dist. LEXIS 54471 The takeaway for policyholders: courts may treat the choice of estimating settings as the insurer’s prerogative unless a policy says otherwise.
Han v. State Farm (New Jersey)
Filed in March 2021, Han v. State Farm Fire and Casualty Company (Case No. 2:21-cv-04219) alleged the new-construction practice across New Jersey, New York, and Pennsylvania. The complaint said State Farm “routinely generated estimates that it knows full well to be below the fair and reasonable cost for the reconstruction of the insured’s property.”13ClassAction.org. Lawsuit Claims State Farm Uses New Construction Numbers to Generate Lower Cost Estimates for Property Remodeling Jobs The case was dismissed with prejudice by stipulation on July 17, 2023, without class certification or a public settlement.14PACER Monitor. Han v. State Farm Fire and Casualty Company
Young v. State Farm (Mississippi)
In Young v. State Farm Fire and Casualty Company (Case No. 2:23-cv-175), the plaintiff alleged that State Farm’s use of the new-construction setting on her fire-damaged home yielded an estimate of $254,656.75, while her contractor’s estimate using the restoration setting came to $306,621.62, a gap of nearly $52,000. On August 12, 2024, the court granted State Farm’s motion to compel appraisal and stayed the case for 90 days. The judge found the labor efficiency dispute was a disagreement over the “amount of loss,” properly resolved through the policy’s appraisal clause rather than in litigation.15FindLaw. Young v. State Farm Fire and Casualty Company
The Older Antitrust Theories
Two earlier cases tried to reframe the Xactimate disputes as antitrust problems. Neither succeeded.
After Hurricane Katrina, homeowners in Schafer v. State Farm Fire and Casualty Co. (Case No. 06-8262, E.D. La.) alleged that State Farm maintained a custom pricing profile inside Xactimate with rates “slightly different from the Xactimate standard prices, although all are below market value,” and pressured adjusters to use those rates. Plaintiffs framed this as a horizontal price-fixing conspiracy with other insurers and Xactware. In August 2007, Judge Stanwood R. Duval Jr. dismissed the price-fixing claims, finding State Farm’s behavior “natural” given its economic incentive to minimize payouts. Breach of contract and negligence claims against State Farm survived; most claims against Xactware were dismissed because it had no contractual relationship with policyholders.16GovInfo. Schafer v. State Farm Fire and Casualty Co., Case No. 06-8262
A similar theory failed in Sheahan v. State Farm General Insurance Company (Case No. 3:18-cv-06186, N.D. Cal.), brought by Northern California wildfire survivors in October 2018. Plaintiffs alleged State Farm first underinsured homes using a zip-code-based calculator called “360 Value,” then used Xactimate to produce rebuild estimates 50% below actual market cost, in part by drawing on manufactured-housing data rather than site-built construction. U.S. District Judge Edward Chen dismissed the complaint twice, and by March 2020 dismissed the case entirely, concluding plaintiffs had not articulated an antitrust injury.17Courthouse News Service. Sheahan v. State Farm, Class Action Complaint18Bloomberg Tax. State Farm Beats Suit Over Wildfire Coverage Software Estimates
What This Means If You Think You Were Underpaid
The pattern in these cases is worth understanding before you decide what to do. When the legal theory tracks a clear state-law rule that a specific Xactimate setting violates — as with Kentucky’s ban on labor depreciation — plaintiffs have won class treatment and money. When the theory is that State Farm should have chosen a different setting inside the software, courts have generally treated that as either a policy-permitted judgment call or a valuation dispute to be resolved through the appraisal clause in the policy, not through class litigation.
Two practical implications follow. First, whether labor depreciation or specific overhead-and-profit deductions are recoverable depends heavily on your state’s law and the dates of your loss; the certified Kentucky and Missouri classes cover defined windows and geographies, not every State Farm policyholder. Second, if your dispute is about the size of an estimate rather than an unlawful deduction, the appraisal provision in your homeowners policy is likely the faster route: the Belotti court treated a successful appraisal as evidence against bad faith, and the Young court sent the parties to appraisal outright. Getting a competing Xactimate-format estimate from a contractor or public adjuster is often what makes that process work.