Case 18.2
SAFECO INSURANCE CO. V. BURR
Supreme Court of the United States
551 U.S. 47; 127 S. Ct. 2201; 2007 U.S. LEXIS 6963 [June 4, 2007]
FACTS:
The Fair Credit Report Act (FCRA) requires notice to any consumer subjected to adverse
action…based in whole or in part on any information contained in a consumer credit report.
Anyone who “willfully fails” to provide notice is civilly liable to the consumer.
Safeco Insurance Company and GEICO General Insurance Company issued automobile insurance
policies to three applicants without telling them that the companies had obtained credit reports.
Respondent Ajene Edo applied for auto insurance with GEICO. After obtaining Edo’s credit score,
GEICO offered him a standard policy with GEICO Indemnity (at rates higher than the most
favorable), which he accepted.
Because Edo’s company and tier placement would have been the same with a neutral score, GEICO
did not give Edo an adverse action notice.
Edo later filed this proposed class action against GEICO, alleging willful failure to give notice in
violation of FCRA, he claimed no actual harm, but sought statutory and punitive damages.
Like GEICO, petitioner Safeco relies on credit reports to set initial insurance premiums, as it did for
respondents Charles Burr and Shannon Massey, who were offered higher rates than the best rates
possible.
Safeco sent them no adverse action notices, and they later joined a proposed class action against
the company, alleging willful violation of the FRCA and sought statutory and punitive damages.
PROCEDURE: The District Court granted GEICO summary judgment finding no adverse action because
the premium would have been the same had Edo’s credit history not been considered. The District
Court granted Safeco summary judgment on the ground that offering a single, initial rate for insurance
cannot be “adverse action.” The Ninth Circuit Court of Appeals reversed both judgments.
ISSUE: Did Safeco and GEICO willfully fail to comply with the FCRA notice requirement, and if so, did
they commit reckless violations?
RULE: “As it applies to an insurance company, ‘adverse action’ is ‘a denial or cancellation of, an
increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of
coverage or amount of, any insurance existing or applied for.” “Under common law, the term reckless
is conduct violating an objective standard: action entailing ‘an unjustifiably high risk of harm that is
either known or so obvious that it should be known.”
REASONING:
1. In GEICO’s case, the initial rate offered to Edo was what he would have received if his credit score
had not been taken into account, and GEICO owed him no adverse action notice under the Act.
2. Safeco did not give Burr and Massey any notice because it thought the Act did not apply to an
initial application, a mistake that left the company in violation of the statue.
Safeco’s misreading of the statute was not reckless.
ADDITIONAL INFORMATION:
FCRA requires, among other things, that “any person who takes any adverse action with respect to
any consumer that is based in whole or in part on any information contained in a consumer report”
must notify the affected customer. The notice must point out the adverse action, explain how to
the statute necessary for reckless liability.