Mitchell v Farmers Insurance Company, Inc.
Consumers Allege Farmers Insurance Uses Credit Reports To Set Premiums
A class action, which apparently covers all U.S. residents, has been filed against insurance giant Farmers Insurance Company, Inc. and its parent, Farmers Group, Inc., on behalf of consumers who, since November 5, 1998, purchased either an automotive or a homeowner's insurance policy with Farmers and later was given a rate increase due to Farmers' alleged utilization of credit reports without the consumer's consent or knowledge. The action is brought under the federal Fair Credit Reporting Act and the Arkansas unfair trade practices law and seeks actual damages, statutory and punitive damages and declaratory relief.
This action arises from Farmers' alleged use of consumer credit reports in adjusting consumers' premium rates. According to the insureds, Farmers frequently obtains a credit report for consumers for whom it has either already written a policy of insurance or has determined is eligible for insurance.
Once the credit report has been obtained, Farmers allegedly uses that information to assist the company in setting the consumer's premium. The insureds assert that this is an unlawful practice that violates the Fair Credit Reporting Act and Arkansas unfair trade practices law for several reasons.
Initially, the insureds allege Farmers' conduct is unlawful because, under federal and state law, Farmers is only allowed to rely on information contained in a consumer credit report for determining if a consumer is eligible for insurance or for making a firm offer of insurance. Once Farmers has determined that a consumer is eligible and has written a policy, the company cannot use credit information for adjusting a premium. Additionally, the insureds assert that Farmers has violated the reporting provisions of the Fair Credit Reporting Act. Under the act, any time a creditor makes an adverse decision based on information contained in a credit report, the creditor must inform the consumer of the adverse decision. A creditor must also inform the consumer that this decision was based on information contained in a credit report and must either provide the information relied upon to the consumer or provide contact information so that the consumer can obtain this information free of charge. The insureds in this case claim that Farmers did none of this, so that the insureds only knew of the adverse credit decision when their premiums unexpectedly increased.
The insureds allege that Farmers has engaged in these activities in willful and intentional disregard of federal and state law. They further assert that these actions are corporate policy and that effected parties number well into the tens of thousands, if not more.
