Okla. Court OKs Class Action Status in Suit Against Farmers Group Companies

April 18, 2006

A judge in the U.S. District Court for the Western District of Oklahoma has granted class action status to a lawsuit concerning the use of credit information in insurance rating against Farmers Insurance Companies.

U.S. District Judge Stephen P. Friot granted the motion for class certification by plaintiffs Harry Corl, Cynthia L. Hodnett, Nyle Cearlock, Arlene Hancock, David L. Watts, Jr. and Donna S. Mobbs on April 13.

According to court documents, the plaintiffs are suing "Farmers Insurance Company Inc., Farmers Group Inc., Farmers Insurance Exchange, Fire Underwriters Assoc., Fire Insurance Exchange and Mid-Century Insurance Company, seeking to recover statutory damages, costs and attorneys' fees based upon defendants' alleged willful violations of the Fair Credit Reporting Act" (FCRA).

The plaintiffs claim that Farmers companies' use consumer report information on their applicants and insureds and "took adverse action against each plaintiff and each class member, based in whole or in part on information obtained in consumer reports, but did not provide adequate notice of the adverse action to each plaintiff and each class member as required by the FCRA," according to the judge's published opinion. The plaintiffs further allege that the companies' failure to provide adequate notice was "willful and deliberate."

Class certification was sought for all who received, renewed and/or purchased personal auto and/or homeowners policies from the named companies and "were charged more than the lowest premium available for such insurance" based on credit history contained in the consumer report.

The judge rejected several of Farmers' arguments against granting class action status, including the companies' contention that oral notice of adverse action given by their appointed representatives was sufficient. Court documents showed that the defendants claimed "their independent insurance agents had a regular business practice of providing oral notice of adverse action to their customers. Defendants assert that the insurance agents routinely informed their customers that credit information was used in determining premiums and also informed their customers if they did not receive the best premium discount based in part on their credit information."

The judge rejected the companies' argument for various reasons, including the fact that "evidence before the court does not reveal that the named plaintiffs or the class members received oral notice of adverse action during the time period when defendants utilized the three adverse action notice forms" that are central to the class definition.

The court noted that its certification decision may be "altered or amended" at a later date "should circumstance warrant."