Insurers take on Toyota in acceleration lawsuits

Hundreds of disgruntled drivers have sued Toyota Motor Corp. over its sudden acceleration issues, hoping to get paid for their safety concerns with Toyota vehicles. The Japanese automaker now faces a more formidable opponent that legal experts say has plenty of time, money and resources to challenge it in court: insurance companies.

Seven insurers filed a lawsuit in Los Angeles last week, looking to recoup more than $230,000 to cover crashes blamed on sudden acceleration. Allstate Corp. also sued Toyota late last year.

While Toyota brushed off the latest litigation and said disputes between automakers and insurance companies are common, legal experts say the world's No. 1 automaker can't be pleased that it's squaring off against an industry that knows its way around a courtroom.

"This isn't David vs. Goliath," said Tom Baker, a professor at the University of Pennsylvania Law School. "This has to be the worst news that the general counsel of Toyota has gotten in a while. If I'm Toyota and I see name-brand insurance companies suing me, I am definitely paying attention."

Working in favor of the insurance companies is an industry database that can give insurers information about accidents nationwide. That potentially damaging evidence could make its way into other lawsuits alleging Toyota is responsible for injuries, deaths, and falling resale values on the more than 10 million vehicles Toyota has recalled since late 2009.

"Presumably they are going to bring in experts and resources on the questions that haven't been answered," said attorney Christine Spagnoli, who has won several multimillion-dollar verdicts against automakers over safety defects. "They made the decision to put in the investment to prove their case, so they must be convinced there is a viable claim."

Insurance companies have played pivotal roles before. State Farm Mutual Insurance Co. said in 2000 that it tipped the National Highway Traffic Safety Administration two years earlier about crashes involving Firestone ATX tires that were later recalled for safety concerns.

NHTSA has said it has received about 3,000 reports of sudden acceleration from Toyota drivers in the past decade, including 93 deaths. The government, however, has confirmed only five deaths from two crashes.

In the insurers' lawsuit filed Dec. 30, the companies cite data compiled by an automative safety research group that sudden acceleration incidents have accounted for at least 725 crashes. The lawsuit accuses Toyota of failing to disclose known defects and not equipping its vehicles with a fail-safe measure that would cause a car to idle if the brake and gas pedals are pressed at the same time.

Among those that sued are Fireman's Fund Insurance, National Surety Corp., Motorists Mutual Insurance and American Hardware Mutual Insurance. Allstate's similar lawsuit filed in October seeks $3 million in compensation.

Toyota has blamed driver error, faulty floor mats and sticky accelerator pedals for the unintended acceleration and denies there is a design defect, as is alleged in some lawsuits that have been consolidated before a federal judge in Orange County.

The U.S. government fined Toyota $48.8 million for its handling of three recalls dating back to 2004, and it was recently disclosed that the automaker paid $10 million to the family of four people killed in an August 2009 crash involving a runaway Lexus.

Insurers likely revel in suing another major entity because often times they find themselves as defendants, said Los Angeles-based lawyer Brian Kabateck, who has sued major banks for discriminatory lending practices. Although a potential payout will be a drop in their financial bucket, insurance companies are aware their involvement in a major lawsuit can have a significant impact.

"It's like giving a kid the keys to a candy store," Kabateck said. "If I was Toyota I would just groan."