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Supreme Court Rules In Favor Of Insurance CompaniesWASHINGTON, June 4 (AP) — The Supreme Court sided with two insurance companies Monday in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses to notify customers who are charged more because of their credit ratings. In a unanimous decision, the justices said the Geico General Insurance Company did not violate the law and that Safeco might have, but did not do so recklessly. The insurance industry said a decision against it could have subjected companies to billions of dollars in punitive damages for failing to notify customers. To find liability, a companys conduct must be more than merely careless, wrote Justice David Souter. Justice Souter said that a companys conduct must entail an unjustifiably high risk of harm that is either known to a company or is so obvious that it should have been known. Overturning an appeals court decision, the Supreme Court adopted a notification requirement favored by the industry. The standard limits the circumstances in which customers must be told their premiums are higher because of their credit ratings. Thirteen state insurance commissioners said that a lower threshhold for proving liability, adopted by the United States Court of Appeals for the Ninth Circuit in San Francisco, would motivate compliance with the law. The appeals court and lawyers for consumers said they must be notified any time they pay more than the lowest rate available to customers with the very best credit scores. Geico has the better position, the Supreme Court said. Geico did not owe a prospective customer such notification, the court said. The company had offered him a rate that was the one he would have received if his credit score had not been taken into account. Safeco did not notify two of its customers because it thought the law did not apply to initial applications, a mistake that left the company in violation of the law. The company was not reckless in falling down on its duty, Justice Souter wrote. Under a more expansive notification standard, Safeco would be required to send adverse action notices to 80 percent of the companys new customers, Maureen Mahoney, a lawyer defending the two companies, said at arguments in the Supreme Court in January. At Geico, just 10 percent of new customers qualify for the top tier of credit, Ms. Mahoney added. Tag CloudExternal InformationAdditional InformationBear Stearns chief to step down after huge US sub-prime losses...Chinese stalk Birmingham City... A Weekly in New Brunswick Prevails Against Local Family... World Business Briefing | Europe: Disagreement Over Trade Talks Within European ... Where Am I?News Main Page - Business - Supreme Court Rules In Favor Of Insurance Companies |
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