Supreme Court to Hear Insurers' Appeals of Credit Report Decision

By William Murphy

Published on October 05, 2006

The companies are appealing a ruling by the Ninth U.S. Circuit Court of Appeals that insurers can be held liable for willfully violating the Fair Credit Reporting Act if they are found to have recklessly disregarded FRCA law requiring an insurer to notify a policyholder when increasing rates based on unfavorable information in the policyholder's credit report.

Other federal circuit courts have ruled that a consumer must have actual knowledge that an insurance company's conduct violated FRCA in order to show the company acted willfully. The Ninth Circuit said that consumers are not required to have actual knowledge of a willful violation. They simply must show that a company recklessly disregarded FRCA's requirements.

Safeco and Geico maintain that charging a higher rate based on credit report information does not violate FRCA requirements unless an insurer initially offered a consumer a lower rate. Insurance industry constituents fear the Ninth Circuit's decision could spawn a multitude of lawsuits and incur enormous penalties for insurance companies if left intact.

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