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After recalls, Toyota may owe insurers

By Curt Anderson and Ieva M. Augstums
Associated Press / April 19, 2010

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MIAMI — Insurance companies are gearing up to recoup from Toyota money they paid for claims in crashes involving sudden acceleration, the subject of major safety recalls by the Japanese automaker.

It could also mean money back for some drivers who paid deductibles.

At least six major insurers, including State Farm Insurance Cos., Allstate Corp., and Geico, have begun examining claims involving the recalled vehicles, which number about 6 million in the United States and 8 million around the world. Insurers can request that Toyota pay them for the claim if a vehicle defect is proven to be a key factor in a crash, a longstanding industry practice known as subrogation.

Many insurers have begun notifying Toyota Motor Corp. they will do just that.

“We’re seeking to have them share in some of the financial liability, because part of it is their fault,’’ said State Farm spokesman Phil Supple.

The move could repay some Toyota owners their out-of-pocket costs due to crashes, but probably wouldn’t have much of an effect on the premiums drivers pay. It would mostly involve crashes in which people were not seriously injured because those cases frequently lead to lawsuits.

Insurance companies typically refund deductibles — the amount a policyholder must pay before the insurance takes over — to their customers when they are repaid in such cases, officials of several companies said. None would release any financial estimates or the number of potential crashes, but given the sheer size of the Toyota recalls the liability could be in the millions of dollars.

State Farm has sought reimbursement from Toyota in cases where cars have sped out of control on their own at least as far back as 2007, according to a letter the company provided to federal regulators. The letter, dated Sept. 18, 2007, sought a formal Toyota investigation into a crash involving a 2005 Camry that surged forward at a stop sign and hit another car.

Toyota issued a limited floor mat recall in 2007, but it didn’t cover the 2005 Camry at issue in the State Farm letter. In the past few months, the automaker has issued two unwanted acceleration recalls for several of its popular models, one to fix floor mats the company says can jam floor pedals and one to repair what it calls a problem with pedals that can stick. Prius hybrids have also been recalled for brake issues.