New York Court Revives Repair Shop's $6,548 State Farm Underpayment Claim
While State Farm told a New York court it had already paid the full amount owed on a collision repair, the insurer could not produce the survey it claimed backed that position, and a repair shop's $6,548.38 underpayment claim is now headed back to court.
Published: Oct 2, 2026
While State Farm told a New York court it had already paid the full amount owed on a collision repair, the insurer could not produce the survey it claimed backed that position, and a repair shop's $6,548.38 underpayment claim is now headed back to court.
Autobody News reported on September 23 that New York's Appellate Division, Second Judicial Department, reversed a lower court ruling that had wiped out a breach-of-contract suit filed by Prospect Auto Sales and Repairs against State Farm Mutual Automobile Insurance Company. The appellate panel's decision found that the lower court was wrong to dismiss the shop's complaint, and that State Farm's own summary judgment argument fell apart without the survey it had cited. According to Autobody News, the decision carries the citation 2026 NY Slip Op 05431 and may still be revised before it appears in the Official Reports.
For New York drivers navigating collision claims, this State Farm repair underpayment lawsuit offers a telling look at how insurers defend underpayment disputes, and what happens when that defense is built on missing evidence.
A Repair Shop Fights Back, and Wins a Second Chance
On February 20, 2023, a 2018 Audi Q7 insured by State Farm was involved in an accident. The policyholder, Janet Sukhram, filed a claim under the policy's collision coverage and brought the vehicle to Prospect Auto Sales and Repairs two days later.
The shop completed the repairs at a total cost of $19,736.60. State Farm paid $13,188.22. That left a gap of at least $6,548.38, the amount at the heart of the lawsuit.
Prospect Auto sued State Farm for breach of contract, seeking to recover that difference. The case went to a state Supreme Court in Putnam County, where Justice Gina C. Capone dismissed the shop's complaint in an April 25, 2024, order, granting State Farm summary judgment.
But the shop appealed. On September 23, the Appellate Division reversed that dismissal and denied State Farm's motion, with Justices Mark C. Dillon, William G. Ford, Helen Voutsinas, and James P. McCormack all concurring.
The shop's second chance rests on two pillars: a legal mechanism that gave it standing to sue, and the insurer's failure to back up its key defense with actual evidence.
How the Assignment of Claim Made the Lawsuit Possible
When Sukhram brought her Audi to the shop, she signed more than a standard repair authorization. She also signed a designated representative authorization, allowing the shop to negotiate repair costs and payment directly with State Farm on her behalf. Then she went a step further.
Sukhram signed an assignment of claim.
That document transferred to Prospect Auto her right to recover any damages resulting from State Farm's failure to pay the full repair bill. In legal terms, it made the shop her assignee, meaning the shop could stand in her shoes and sue the insurer directly.
This kind of assignment is a consequential document for policyholders to understand. If you sign one at a repair shop, you are transferring your rights in the claim. The shop then controls the litigation, not you.
The shop alleged State Farm had a duty to negotiate with it in good faith and that the insurer failed to do so on matters including the repair methods, parts, and materials needed to restore the Audi, as well as their cost. The Law Offices of Anthony J. Mamo Jr., P.C., represented the shop.
The Missing Survey: Why State Farm's Defense Collapsed
State Farm's central argument was straightforward: it had already paid what it owed. The insurer said its payment was based on its own repair estimate written at what the policy called the "prevailing competitive rate," set by a survey State Farm said it had prepared.
The appellate panel was not impressed.
The court called that argument "wholly conclusory and unsubstantiated" because State Farm "never furnished the survey it purported to rely upon." Without the survey, the insurer's claim that it had paid the correct amount had no evidentiary foundation.
State Farm also submitted an affidavit from one of its representatives on the question of good-faith negotiation. The court found that affidavit did not reflect the representative's own personal knowledge and instead "improperly relies on hearsay within hearsay."
Because State Farm failed to meet the threshold showing required of a party seeking summary judgment, the court held that the motion should have been denied regardless of how strong or weak the shop's opposing papers were. Mura Law Group, PLLC, of Buffalo, N.Y., represented State Farm.
Contract Claims vs. Statutory Claims: A Critical Legal Distinction
The lower court dismissed the shop's complaint largely because it read the lawsuit as an attempt to enforce Insurance Law Section 2601 and 11 NYCRR 216.7, rules that do not provide a private right of action to individual litigants.
The appellate panel read the complaint differently.
It found that the shop was not suing to enforce the statute and regulation themselves. Instead, the shop was seeking breach-of-contract damages, with the statutory and regulatory violations cited as supporting evidence that State Farm had breached its contractual duties.
That distinction matters enormously. A claim for violating a regulation with no private right of action goes nowhere. A claim that an insurer breached its contract, and that those regulatory violations help prove the breach, survives on different legal footing.
In reaching that conclusion, the court cited East Collision, Inc. v. State Farm Mutual Automobile Insurance Co., a 2025 Westchester County Supreme Court decision, as instructive authority.
State Farm's Repair Underpayment Disputes: A Snapshot Across Cases
This lawsuit does not exist in isolation. State Farm has faced related disputes in multiple jurisdictions involving repair and valuation underpayments. Here is how some key figures compare across cases mentioned in source reporting.
| Prospect Auto v. State Farm | New York (Putnam County) | $6,548.38 alleged underpayment on $19,736.60 repair | Remanded to lower court after appellate reversal, Sept. 23, 2026 |
| Tennessee total-loss valuation class action | Tennessee (6th Circuit) | Roughly 90,000 affected policyholders | Class certification denied April 2026; policyholders cannot jointly sue |
| East Collision, Inc. v. State Farm | Westchester County, New York | Not specified in source | Cited as favorable precedent by appellate panel in Prospect Auto decision |
The Tennessee ruling, issued by the U.S. Court of Appeals for the 6th Circuit, addressed a different but related issue: a downward adjustment State Farm applies when valuing totaled vehicles. For Tennessee drivers, that ruling means roughly 90,000 affected policyholders cannot pursue the insurer as a class.
The Save Max Quote Index tracks premium trends across carriers using data drawn from 3.3 million+ real quote requests. When litigation patterns emerge around a major carrier's claims practices, the SMQI shows that rate shopping across insurers, not loyalty to one, consistently delivers the strongest consumer outcomes.
What this means for you
Review every repair estimate your insurer provides during a collision claim and ask explicitly whether the payment reflects a rate survey, then request a copy of that survey in writing. Understand what you sign at the repair shop: an assignment of claim transfers your legal rights in the dispute, so read it before you agree. If you believe your insurer has underpaid a repair bill, document every communication and consult an attorney who handles insurance disputes. Drivers in high-litigation states like New York and New Jersey should be especially attentive to how their policies define "prevailing competitive rate" for repairs.
What Comes Next in This Case
The appellate reversal does not hand Prospect Auto a victory. It returns the case to the lower court, where the litigation will continue. State Farm still has the opportunity to present its defense, including, potentially, the survey it failed to produce during the summary judgment phase.
A trial or settlement remains possible. Neither outcome is guaranteed.
One additional caveat: the decision, 2026 NY Slip Op 05431, carries a note that it "may still be revised before it appears in the Official Reports." That means the written opinion itself is not yet final in its published form.
For the shop, the immediate win is the right to keep fighting. For policyholders watching the case, the outcome at trial will determine whether the $6,548.38 gap, and the broader question of what State Farm owes when its survey never surfaces, is ever resolved.
FAQ
Can a repair shop sue my insurance company on my behalf?
Yes, if you sign an assignment of claim. In the Prospect Auto case, the policyholder transferred her legal rights to the shop by signing that document, which then allowed the shop to sue State Farm directly as her assignee. Read any assignment carefully before you sign, because you are giving up direct control of the claim.
What is a "prevailing competitive rate" in an auto insurance policy?
It is a contractual term some insurers use to define the labor or parts rates they will pay for collision repairs. In the Prospect Auto case, State Farm argued its payment was based on a prevailing competitive rate established by a survey it had prepared, but the court found it never actually produced that survey, making the defense unsubstantiated.
What did the 6th Circuit decide for Tennessee State Farm policyholders?
The U.S. Court of Appeals for the 6th Circuit ruled in April that roughly 90,000 Tennessee policyholders cannot jointly sue State Farm over a downward adjustment the insurer applies when valuing totaled vehicles. The ruling blocked class certification, meaning affected individuals would need to pursue claims separately. Tennessee auto insurance consumers should review any total-loss settlement they receive from a carrier carefully.
Why did the lower court dismiss the shop's lawsuit, and why did the appeals court reverse it?
The lower court read the complaint as an attempt to enforce Insurance Law Section 2601 and a related regulation, neither of which allows a private lawsuit. The appellate panel found that was a misreading: the shop was suing for breach of contract, with the regulatory violations cited only as evidence supporting the contract claim. That is a legally distinct theory that can proceed independently.
How can I check whether my insurer's repair payment is fair?
Request an itemized estimate and ask your insurer to explain the labor rates it used and whether those rates are based on a market survey. If a survey exists, ask for a copy. You can also get an independent estimate from a licensed repair facility. Shoppers who compare carriers before a claim, using tools grounded in real quote data like the Save Max Quote Index, often find meaningful variation in how different insurers handle claims as well as premiums.
About Aaren Ramon
Aaren Ramon is a Senior Analyst at Save Max Auto and owner of Elite Shield Agency. He covers carrier moves, regional insurance markets, and consumer-impact reporting from the agency-owner perspective. Read more from Aaren Ramon →
Edited by Cassidy Richey.
Methodology
This article is grounded in the source linked above. Save Max Auto data points referenced here are drawn from the Save Max Quote Index (SMQI), a proprietary instrument reflecting 3,364,317 real consumer quote requests submitted to savemaxauto.com. State and carrier rankings reflect the lifetime dataset; year-over-year shifts reflect a rolling 12-month window. The index is refreshed monthly. External authority figures referenced (NAIC, NHTSA, state regulators) reflect the most recent public data releases available at time of writing.
Sources
- Primary source: Autobody News, "New York Appeals Court Revives Repair Shop's Breach-of-Contract Suit Against State Farm"