WASHINGTON--Insurance industry groups are hailing a Supreme Court ruling that will keep questions about how to interpret willful violations of the Fair Credit Reporting Act from going to a jury.
In vacating a Third Circuit Court of Appeals decision, the high court effectively ruled that the issue should be decided as a matter of law. The lower court ruling said it should be decided by a jury.
Under the FCRA, companies are required to provide notice to consumers when they take an "adverse action" such as offering higher rates based on their credit information, and a willful violation can subject them to penalties.
"This is an important decision that helps preserve the positive aspects of the recent U.S. Supreme Court decisions on adverse action notices and willfulness," said David Snyder, American Insurance Association vice president and assistant general counsel.
"If allowed to stand, the lower court's ruling would have potentially led to a multiplicity of cases that would allege that any interpretation of the FCRA later decided to be incorrect would allow a claim to go to the jury for 'willful' damages that include extensive monetary penalties and attorney's fees," he added.
At issue for insurers was the question of whether the "willful" issue should be decided as a matter of law by district and appellate courts, or as a factual issue left for juries to decide.
A Third Circuit Court of Appeals ruled that the issue was the latter in the case of Radian Guaranty Inc. vs. Whitfield. In a brief filed with the U.S. Supreme Court, insurance industry groups including the American Insurance Association, the Property and Casualty Insurers Association of America and the National Association of Mutual Insurance Companies argued that, based on precedent from the case of Safeco Insurance Co. vs. Burr, the issue should be decided as a matter of law.
In their brief, the groups elaborated on the potential difficulties facing companies had the Third Circuit ruling been allowed to stand.
"The Third Circuit's decision makes it virtually impossible for a FCRA defendant to obtain summary judgment on the issue of 'willfulness,'" they argued in the brief.
"The likely result will be coerced settlement of most such suits; going to trial on the issue of willfulness is not a realistic option for most FCRA defendants under those circumstances. Because the great majority of large corporations are susceptible to suit in the Third Circuit, unless the decision below is overturned one can reasonably anticipate that the Third Circuit will become the circuit of choice for most putative class actions alleging FCRA violations."
In the Safeco case, the high court found that the insurer had taken an adverse action and should have provided notice, but allowed that the company had not willfully violated the law. Penalties for willful FCRA violations are increased, subjecting the violator to statutory damages, punitive damages and the obligation to pay attorneys' fees and costs.
The high court ordered the case back to the Third Circuit with instructions that it be dismissed as moot.
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