Insurer Group Urges Supreme Court to Overturn Ruling on Credit Scoring

November 29, 2006

A national insurance trade group has filed an amicus brief urging the U.S. Supreme Court to overturn the cases of Safeco Insurance v. Burr and Geico General Insurance v. Edo, which said insurers acted in willful disregard of the law by not sending out adverse action notices whenever a consumer’s credit information did not result in the consumer receiving the best possible rate.

According to the suburban Chicago-based Property Casualty Insurers Association of America (PCI), these cases involve a ruling from the 9th Circuit Court of Appeals which took the very unusual step of withdrawing and issuing an opinion three times on this matter. While the 9th Circuit did not materially change its ruling, ultimately it did moderate its position on the issue of willful disregard. PCI expressed its concerns regarding the circuit court opinion and filed amicus briefs after each one was handed down, the trade group’s statement said.

The 9th Circuit held that the Fair Credit Reporting Act’s (FRCA) adverse action notice is required whenever a company uses credit information in determining the insurance rate applied, and the consumer did not receive the lowest rate. Additionally the court
maintained that every company, within a family of companies that accessed the credit information must send the consumer an adverse action notice. The only part of this third opinion that was different from the previous two was the application of willfulness. The court held that “if a company knowingly and intentionally performs an act that violates FCRA, the company will be liable for willfully violating consumer rights and [that may] constitute reckless disregard for the law.” The court’s opinion differs from their previous decisions in that the court advised that in some cases the court must look at “specific evidence as to how the company’s decision was reached, including the testimony of the company’s executives and counsel.”

“We strongly disagreed with the lower court’s ruling that these companies acted in willful disregard of the law,” said Kathleen Jensen, senior legal counsel and director for PCI. “Insurers take very serious their responsibility to comply with the FCRA and operate in the best interests of their policyholders. The 9th Circuit used a very low standard for determining willful disregard of the law, and that lower standard could open the door to increased litigation and substantial penalties for insurers.”

Jensen added that, it is our opinion that the 9th Circuit imposed a new set of rules for notice requirements that conflict with the FCRA statute and runs counter to previous court decisions. The 9th Circuit’s ruling has caused confusion because it was inconsistent with other courts around the country. Once the U.S. Supreme Court rules on this matter we will have greater certainty regarding how insurers must comply with the FCRA, she said.

PCI’s brief focuses on how the 9th Circuit erred when they expanded the content of the adverse action notice beyond what was contained in the FCRA.

PCI identifies itself as a national property casualty insurance trade association, composed of more than 1,000 member companies. PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance. Member companies write 51.3 percent of the U.S. automobile insurance market, and 39 percent of the homeowners market.

Source: PCI

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