The U.S. Supreme Court today unanimously backed the disclosure policies that 2 insurance companies follow when they use credit reports to assign a consumer a rate that is higher than the best possible rate.
Insurers had argued for a flexible standard on “adverse action notices.”
If the Supreme Court had rejected the insurers’ position, insurers could have faced a new wave of class-action lawsuits from consumers who were not told that poor credit scores had affected their insurance rates, insurers say.
The Supreme Court was reviewing a 2006 9th U.S. Circuit Court of Appeals ruling on Safeco Insurance Company of America et al. vs. Burr et al.
In considering 3 Oregon cases, the appeals court held that the insurer defendants had acted “in willful disregard” of the Fair Credit Reporting Act when they failed to disclose that they had given consumers rates other than the best rates as a result of use of credit reports.
The consumers involved had a right to recover damages, the appeals court held.
Maureen Mahoney of Latham & Watkins, Washington, who represented 2 of the defendants, Government Employees Insurance Company, Washington, and Safeco, Seattle, told Justice Ruth Bader Ginsburg during oral arguments in January that interpreting the law the way the plaintiffs wanted could expose insurers to “tens of billions of dollars” in claims.
Class-action lawsuits had already been filed, and, under the law as interpreted in the 9th Circuit decision, consumers could be awarded $1,000 each if an adverse action notice was not sent in each case in which an applicant for insurance was not given the lowest possible rate, Mahoney said.
The Supreme Court found in its decision that GEICO did not violate the law.