Supreme Court Update Safeco Insurance Co. of America, et al v. Burr, et al

On June 4, 2007, the United States Supreme Court in Safeco Insurance Co. of America, et al v. Burr, et al addressed some of the provisions of the federal Fair Credit Reporting Act (the "Act"). As the Court explained, the Act was passed to “ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.”

The Act addresses many aspects of “consumer reports”. For instance, under the Act, “[i]f any person takes any adverse action with respect to any consumer that is based in whole or in part on information contained in a consumer report”, the person must notify that consumer of the adverse action and provide other specific details to that consumer. Typically, a credit report is a consumer report under the Act.

Under the Act, a consumer can recover damages if a person willfully or negligently violates the Act. The damages recoverable for a willful violation are greater than the damages recoverable for a negligent violation.

After determining that the reckless disregard of a statutory duty amounts to a willful violation, the Court addressed whether Safeco Insurance Co. of America (“Safeco”) willfully violated the Act by not providing the requisite adverse notice to initial applicants. Safeco maintained it did not willfully violate the Act since the Act only required it to provide an adverse notice when an existing customer’s premium was raised based in whole or in part on information contained in a credit report. The Court rejected Safeco’s position. Nonetheless, the Court did not find that Safeco’s conduct amounted to a willful violation of the Act because Safeco’s interpretation was “objectively reasonable” and there was little, if any, prior guidance from authoritative sources concerning Safeco’s practice.

The Act does not apply only to insurers but also to employers, creditors, those who furnish credit information and others. The Act governs conduct that is not discussed above and has broad ramifications against any person who violates the Act.

Author Sandy D. Baron is a shareholder with Shulman, Rogers, Gandal, Pordy & Ecker, P.A. He has been litigating cases involving the Fair Credit Reporting Act in federal and state courts for more than 25 years. To contact Mr. Baron, please click here.