A preliminary settlement of the proposed class action was filed on Monday night in federal court in Manhattan, and requires approval by U.S. District Judge Lorna Schofield.
Policy holders alleged that Progressive used third-party software that underestimated what their vehicles could have been sold for before they became total losses.
They said the software used adjustments that overstated the impact of haggling, when the availability of prices online made such negotiations obsolete.
This effort to "thumb the scale" artificially reduced payouts, violating Progressive's policies and New York's general business law, the policy holders said.
Progressive denied wrongdoing in agreeing to settle.
Neither the Mayfield, Ohio-based insurer nor its lawyers immediately responded to requests for comment on Tuesday.
The settlement covers New York policy holders from July 28, 2015 to the present. Each member of the settlement class is expected to receive a $335 check, court papers show.
Lawyers for the policy holders may seek up to $16 million in legal fees.
The case is Volino et al v Progressive Casualty Insurance Co et al, U.S. District Court, Southern District of New York, No. 21-06243.
