In re Farmers Insurance Co., Inc., FCRA Litigation (738 F. Supp. 2d 1180, 2010)

United States District Court for the Western District of Oklahoma 2010-09-20

Judiciary and Judicial Procedure

Citations

Full opinion text

ORDER

STEPHEN P. FRIOT, District Judge.

Before the court are Defendants’ Motion for Summary Judgment (doc. no. 945) and Plaintiffs’ Cross Motion for Partial Summary Judgment on Certain Affirmative Defenses (doc. no. 952). The issues have been fully briefed, and the matter is ripe for determination. Upon due consideration, the court concludes that oral argument in regard to the motions is not required.

Background

Plaintiffs, Harry Corl, Cynthia L. Hod-nett, Nyle Cearlock, Arlene Hancock, David L. Watts, Jr. and Donna S. Mobbs, individually and on behalf of all others similarly situated, have sued defendants, Farmers Insurance Company, Inc., Farmers Group, Inc., Farmers Insurance Exchange, Fire Underwriters Association, Fire Insurance Exchange and Mid-Century Insurance Company, seeking to recover statutory damages, costs and attorneys’ fees based upon defendants’ alleged willful violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681, et seq. In Plaintiffs’ Consolidated and Amended Class Action Complaint, plaintiffs allege that defendants have instituted a corporate policy of obtaining consumer report information as to their applicants and insureds for the purpose of insurance underwriting. See, Plaintiffs’ Consolidated and Amended Class Action Complaint (doc. no. 493), ¶ 73. They additionally allege that defendants took adverse action against each plaintiff and each class member, based on information obtained from consumer reports, but did not provide adequate notice of the adverse action to each plaintiff and each class member as required by the FCRA. Id. at ¶ 74. They further allege that defendants’ decision not to provide adequate notice of adverse action to each plaintiff and each class member was willful and deliberate. Id. at ¶ 75. Plaintiffs and class members “seek statutory penalties from $100-$1000 per violation for Defendants’ willful violation of the FCRA, and seek to recover costs and their attorneys’ fees.” Id. at ¶ 81.

On April 13, 2006, the court granted Plaintiffs’ Opposed Motion for Class Certification (doc. no. 524) and certified, pursuant to Rule 23, Fed.R.Civ.P., the following class:

All individual consumers who renewed or purchased auto or homeowners insurance from Farmers Insurance Company, Inc., Mid-Century Insurance Company, Farmers Insurance Exchange, or Fire Insurance Exchange and did not receive the largest credit discount for such insurance based in whole or in part on information contained in a consumer report, and who received from Farmers Insurance Company, Inc., Mid-Century Insurance Company, Farmers Insurance Exchange, or Fire Insurance Exchange’s form designated as follows:

25-7535 (version dated 6-00); or

25-7581 (version dated 9-00); or

25-7585 (version dated 9-00).

Excluded from the class are: (1) Defendants and all directors, officers, agents and employees of Defendants; (2) claims by any person or entity who timely opts out of this proceeding; (3) all currently serving federal district court judges, their current spouses, and all persons (and their current spouses) within the third degree of consanguinity to such federal district court judges and spouses; and (4) any person who has given a valid release concerning the claims asserted in this suit.

See, Order (doc. no. 568). In light of Supreme Court’s decision in Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), the parties have filed motions, pursuant to Rule 23(c)(1)(C), Fed.R.Civ.P., seeking to amend the class definition. The court will address those motions in a separate order.

Defendants previously filed a motion for summary judgment which was also based, in part, on the Safeco decision. In a hearing conducted on November 9, 2007, the court concluded that the adverse action notices at issue did not comply with the requirements of the FCRA, 15 U.S.C. § 1681m(a). The court also concluded that the evidence is so highly conflicting that the issue of willfulness is a fact issue which must be tried. The court subsequently granted the parties leave to file additional motions for summary judgment. In the motion for summary judgment now before the court, defendants seek summary judgment, pursuant to Rule 56, Fed.R.Civ.P., on the following grounds:

1. Defendants did not take any adverse action against plaintiffs, Cynthia L. Hod-nett (“Hodnett”), Nyle Cearlock (“Cearlock”), and Arlene Hancock (“Hancock”), and did not take adverse action against plaintiffs, Harry Corl (“Corl”) and David L. Watts, Jr. (“Watts”), except on certain policy renewals;

2. Defendants are not liable to plaintiffs Cearlock and Watts because defendants’ agents provided plaintiffs with “notice of the adverse action” verbally;

3. Defendants did not willfully violate the FCRA, as a matter of law, with respect to new-business insureds;

4. Defendants, Farmers Group, Inc. (“FGI”) and Fire Underwriters Association (“FUA”), did not take adverse action with respect to any plaintiff or putative class member and as a matter of law cannot be held liable for failing to comply with § 1681m(a).

5. Defendants, Fire Insurance Exchange (“FIRE”), FUA and Mid-Century Insurance Company (“Mid-Century”), should be dismissed because no representative plaintiff has standing to sue FIRE or- FUA and the claims against Mid-Century are time-barred;

6. Plaintiffs’ attempt to aggregate statutory damages under 15 U.S.C. § 1681n(a)(l)(A) on a class-wide basis is not permitted by the FCRA;

7. The statutory damages provision of the FCRA, § 1681n(a)(l)(A), is unconstitutionally vague;

8. Plaintiffs’ attempt to aggregate statutory damages on a class-wide basis violates the Due Process Clause of the United States Constitution;

9. Plaintiffs are not permitted under the FCRA to recover an award of statutory damages in excess of the statutory minimum in the absence of any evidence of injury or harm to the individual class members; and

10. Plaintiffs’ claims are barred because claims for violations of § 1681m(a) must be enforced exclusively by the “chief law enforcement officer” of the various states in which plaintiffs and putative class members reside, or by the appropriate federal administrative agency, as provided in 15 U.S.C. § 1681m(h)(8).

In their cross-motion for partial summary judgment, plaintiffs seek partial summary judgment, pursuant to Rule 56, on defendants’ alleged affirmative defenses, including the following asserted defenses:

1. Plaintiffs’ Consolidated and Amended Class Action Complaint fails to state a claim upon which relief can be granted;

2. Any statutorily required notice pursuant to the FCRA was provided to plaintiffs;

3. Reasonable procedures were maintained by defendants to assure compliance with the FCRA;

4. Each individual and putative class plaintiff lacks standing to bring claims alleged in plaintiffs’ Consolidated and Amended Class Action Complaint;

5. Plaintiffs’ claims are barred in whole or in part by the doctrines of waiver and/or estoppel;

6. Plaintiffs’ claims are barred by the applicable statute of limitations;

7. The claims of plaintiff Watts and any putative class member insured in the State of Texas are barred by prior settlement and release;

8. Plaintiffs’ attempt to aggregate statutory damages on a class-wide basis is barred by the Due Process Clause of the United States Constitution; and

9. Private enforcement of plaintiffs’ claims is barred by 15 U.S.C. § 1681m(h)(8).

Standard of Review

Under Rule 56(c), Fed.R.Civ.P., summary judgment shall be granted if the record shows that “there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” The moving party has the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when “there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether a genuine issue of a material fact exists, the evidence is to be taken in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). All reasonable inferences to be drawn from the undisputed facts are to be determined in a light most favorable to the non-movant. United States v. Agri Services, Inc., 81 F.3d 1002, 1005 (10th Cir. 1996). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials, demonstrating that there is a genuine issue for trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983).

Defendants’ Motion for Summary Judgment

I. Relevant Facts

The following relevant facts are either undisputed or viewed in a light most favorable to plaintiffs, as non-moving parties.

A. Defendants’ FARA and FPRA Discount Program and FCRA Notice

In 1999, defendants implemented a new risk-based premium pricing program referred to as the Revised Pricing Mechanism (“RPM”). With RPM, defendants utilized for the first time consumer credit report information to rate automobile and homeowners insurance policies. The portion of the RPM pricing calculus that used credit report information to price automobile policies was called Farmers Auto Risk Assessment (“FARA”), and the portion of the RPM pricing calculus that used credit report information to price homeowners insurance policies was called Farmers Property Risk Assessment (“FPRA”). See, Declaration of William A. Redding in Support of Defendants’ Motion to Amend Class Definition (“Redding Deck”), ¶ 3, Ex. 2 to Declaration of Timothy W. Snider in Support of Defendants’ Motion for Summary Judgment (“Snider Deck”) (doc. no. 947).

As part of the FARA and FPRA programs, defendants contracted with Trans Union Corporation (“Trans Union”), a consumer reporting agency, to obtain consumer credit information on persons insured or purchasing insurance from defendants. The contract between defendants and Trans Union provided that Trans Union would provide defendants with insurance “risk assessment” scores (hereinafter “credit-based insurance scores”). The credit-based insurance scores were obtained from consumer credit information held by Trans Union using a mathematical algorithm derived by Fair Isaac Corporation which statistically and actuarially predicts risks for insurance carriers. See, Declaration of Jeffrey L. Roberts in Support of Farmers’ Opposition to Motion for Class Certification (“Roberts Deck”), ¶¶ 4-5 (doc. no. 531); Deposition of Jeffrey Roberts, p. 31,11. 1-25, p. 32,11. 1-9; Ex. 9 to Plaintiffs’ Response in Opposition to Defendants’ Motion for Summary Judgment (doc. no. 952) (“Plaintiffs’ Response”).

When defendants requested Trans Union to provide the credit-based insurance score for a consumer, Trans Union electronically provided defendants a single numerical score from 0-999 derived by Trans Union using the consumer credit information accumulated by Trans Union and processed through Fair Isaac’s algorithm. The credit-based insurance score was then converted by defendants into an alpha or letter code (from A to Z) based on defendants’ underwriting groups’ determination of the underwriting results experience in the state at issue. See, Roberts Deck ¶ 7. The alpha or letter code (from A to Z) is called a FARA or FPRA code. See, Red-ding Deck, ¶ 4. Each FARA and FPRA code has an associated numeric factor called the FARA or FPRA factor. See, Declaration of Lynne Wehmueller in Support of Defendants’ Motion for Summary Judgment (‘Wehmueller Decl.”) (doc. no. 946). The FARA or FPRA code affected the level of discount for which a particular insured was eligible. The closer the FARA or FPRA code was to “A,” the higher the discount. Roberts Decl. ¶ 7.

Beginning in early 2000 and continuing through 2001, defendants implemented the RPM pricing program in many states. New-business insureds and existing policyholders whose policies came up for renewal were qualified for one of several RPM rating plans based on such factors as driving history, gender, past insurance claims and age, which provided a base premium rate for the particular policy. Once a policy was assigned a base premium rate within a rating plan, defendants applied a FARA or FPRA code discount to the base premium rate, derived from the insured’s credit-based insurance score. Those insureds with higher credit-based insurance scores received discounts off the base premium rate, with the discount declining in relation to the FARA or FPRA code. Those insureds with the lowest credit-based insurance scores received no discount off the base rate. FARA and FPRA code discounts varied by state and company and were adjusted over time. Redding Decl., ¶ 5.

For example, upon implementation of FARA in Arkansas on January 1, 2001, a FARA code “A,” with corresponding FARA factor .80, received a 20 percent discount off the base rate, while a FARA code “F”, with corresponding FARA factor .95, received a 5 percent discount, and a FARA code “Z,” with corresponding FARA factor 1.0, received no discount. Upon implementation of FPRA in Arkansas on April 16, 2002, a FPRA code “A,” with corresponding FPRA factor of .55, received a 45 percent discount off the base rate, a FPRA code “F,” with corresponding FPRA factor .67, received a 33 percent discount and a FPRA code “Z,” with corresponding FPRA factor 1.0, received no discount. Redding Deck, ¶ 5, Wehmueller Deck, ¶¶ 4-5.

When defendants implemented the RPM pricing program, they intended the FARA and FPRA discounts as a whole to be revenue neutral across their book of business. However, because FARA and FPRA provided discounts off from defendants’ base premium rates, in many states the base rates were increased in order to maintain revenue neutrality for this factor (referred to as “base rate offsets”). The amount of any base rate varied by state, by company and by product line. At the same time as base-rate offsets were implemented, base rates were often increased for other reasons as well. Redding Deck, ¶10.

Defendants’ RPM program was set up as it was in large part because of a marketing opportunity. According to Ruth Howald, defendants’ Senior Actuary and Texas Auto Product manager, “it was better to say you don’t surcharge anybody for this particular time. You offer a discount to those who qualify.” Ex. 5 to Plaintiffs’ Response to Defendants’ Post-Sh/eco Motion for Summary Judgment (doc. no. 828), p. 212, 11. 13-14, 23-25, p. 213, 1. 1. Defendants knew that giving a discount from a high base rate was mathematically identical to applying a surcharge to a low base rate. Id., p. 212, 11. 23-25, p. 213, 11. 1-4.

As part of the implementation of the FARA and FPRA program, defendants created the FCRA notices that are the subject of this lawsuit (Forms 25-7535 (version dated 6-00), 25-7581 (version dated 9-00) and 25-7585 (version dated 9-00)) and sent the notices to each insured (new business and renewal insureds) who did not receive the largest FARA or FPRA discount. The FCRA notices were sent in the insureds’ new business or renewal policy packets. The policy packets included a notice of the premium amount that was charged to each insured. The FCRA notices were used by defendants from implementation of FARA and FPRA until September 2002, when they were replaced. Redding Deck, ¶8. The court, as stated, has previously concluded that the FCRA notices at issue in this case did not comply with the FCRA.

B. Defendants Used FARA and FPRA Code and Discount Factors to Price Plaintiffs’ Insurance Coverage

Following the implementation of FARA and FPRA, defendants charged premiums to plaintiffs based in part on plaintiffs’ credit-based insurance scores and corresponding FARA and FPRA codes and discount factors. In new-business or renewal insurance packets sent to plaintiffs, defendants included a bill for the premium and a written FCRA notice if a plaintiff did not receive the largest FARA or FPRA discount applicable at the time.

C. Conversations BeUveen Defendants’ Agents and Certain Plaintiffs

In August 2001, defendants sent plaintiff Cearlock a written FCRA notice along with his renewal bilk At that time, defendants had priced plaintiff Cearlock’s automobile insurance premiums, in part, based upon a FARA code “G” with a corresponding FARA factor .82, resulting in an eighteen percent discount. Plaintiff Cearlock then contacted his insurance agent, Dana Hotho (Priddy), in or around August 2001. In his deposition, plaintiff Cearlock testified as follows about that conversation:

Q. [D]id [Ms. Hotho] explain to you at that time the whole credit score and process that Farmers went through?

A. Yes.

[W]e talked about this credit score. I said well, what is my score? She said I don’t know. Let me check on the computer. So she gets on the computer. She said, oh, it’s a G. I said and what does a G mean? She said that’s good. I said what is the top score? And she said A. At that time I said, no. I’m not accepting this. I want to know why I don’t have an A because I’m very proud of my credit report.

I asked her what’s the top score? She said a thousand and she said but nobody gets that top score of a thousand.

And she said — and about the — -when I talked to her about A, B, C, D rating she said we only have two people in our — in this city that has an A rating.

See, Deposition of Near Cearlock, p. 32, 11. 18-20; p. 33, 11. 4-11; p. 34,11. 7-9, 13-15, Ex. 5 to Snider Deck (doc. no. 947). Following this discussion, plaintiff Cearlock obtained a copy of his credit report, found errors, corrected them, informed defendants of the corrections and received a refund. Defendants’ records reflect that on September 12, 2001, defendants revised plaintiff Cearlock’s FARA code from “G” to “D,” and refunded Cearlock the premium difference for his March 10, 2001 renewal and his September 10, 2001 renewal. Ex. 4 to Snider Deck (doc. no. 947). Plaintiff Watts also had a conversation with his insurance agent, which according to plaintiff Watts occurred in August of 2002. In his deposition, plaintiff Watts testified as follows:

A. I believe the thrust of the lawsuit is focused on the house insurance and use of the credit score as it relates to the house. We believe, I believe, I’m convinced that the cars were also rated in excess. The premiums were high because of the improper use of credit scores.

Q. You said you were convinced that the cars were also rated in excess. What is it that convinces you?

A. The local agent [Phillip Smith] told me that the premiums we were paying for both the house and the cars were high because, in part, of credit scores we had been assigned by Farmers.

Q. You said that you talked to [Mr. Smith] and he told you that the increase in the premiums were in part caused by the credit score?

A. Yes.

With respect to the house, he offered two explanations that I recall. Number one, he blamed some of the extreme increase we saw on the mold issue. Number two, he went on to say; he and his staff went on to say let’s check your credit scores and see what they are. They went to a computer, pulled those up, and said, ah, here’s part of the problem, too. It’s your credit score.

They said there are two scores. One for the house and one for the car. As I recall, both were a G. I said, what does G mean? I’ve got no clue. They said, A is best. Z is worst. I said, that doesn’t make much sense because I know our credit scores, at least what I thought of as financial credit scores, had been very high. And that’s when I became aware of the credit scores.

See, Deposition of David Lee Watts, Jr., p. 17,11. 4-22; p. 18,11. 1-8, 11-18, 21-23, Ex. 7 to Snider Decl. (doc. no. 947). After the conversation with his insurance agent, plaintiff Watts also obtained a copy of his credit report, found errors and made corrections. Id., p. 23, 11. 4-16, 23-25; p. 24, 11.1-5.

D. The Corl, Watts and Mobbs Complaints

On February 6, 2003, plaintiff, Donna S. Mobbs (“Mobbs”), sued Farmers Insurance Company, Inc. (“FICI”) in this district on behalf of herself and other homeowners insureds. The complaint defined the putative class as follows:

All persons in Oklahoma who purchased homeowners insurance from Farmers and who have had an adverse adjustment in the premium charge for such policies issued by Farmers based in whole or in part on information obtained by Farmers or its agents from consumer credit information about Class members and proper disclosure was not made to the Class members in accordance with the requirements of FCRA during the period February 10, 2000 through the date of the filing of this Complaint.

See, Class Action Complaint (doc. no. 1); Ex. 10 to Snider Deck (doc. no. 947). The Mobbs complaint only alleged claims against FICI on behalf of Oklahoma homeowners insureds.

Six days later, on February 12, 2003, plaintiff Watts and Russell Autry sued FGI, FICI, Farmers Insurance Exchange (“FIE”), FIRE and FUA in the Western District of Arkansas on behalf of themselves and other homeowners insureds. The complaint defined the putative class as follows:

All persons in the United States who purchased Homeowners insurance from Farmers and who were subjected to an adverse adjustment in the premium charge for such policies issued by Farmers based in whole or in part on information contained in their credit records and who did not receive contemporaneous and proper notification that adverse action had been taken against them in accordance with the requirements of the FCRA during the two year period prior to the date of the filing of this Complaint until class certification....

See, Plaintiffs’ Original Class Action Complaint (doc. no. 46); Ex. 9 to Snider Decl. (doc. no. 947). The Watts complaint did not allege claims against Mid-Century, nor did it allege any claims on behalf of any automobile insureds.

About four months later, on June 18, 2003, plaintiffs Corl, Cearlock, Hancock and Hodnett filed a class action complaint against FICI and FGI in the Eastern District of Arkansas for violating § 1681m(a). The Corl complaint defined a putative class to include:

All persons who received, renewed, and/or purchased auto and/or homeowners insurance from Defendant FICI and who did not receive Defendant FICI’s lowest premium for such insurance after Defendant FICI or Defendant FGI had obtained any credit information from a consumer reporting agency relating to such person.

See, Plaintiffs’ Original Class Action Complaint (doc. no. 61); Ex. 11 to Snider Decl. (doc no. 947). The Corl complaint asserted claims only on behalf of FICI insureds. The Corl complaint, however, asserted, for the first time, claims against FICI on behalf of automobile insureds.

On January 24, 2005, Plaintiffs’ Consolidated and Amended Class Action Complaint was filed in the Corl, Watts and Mobb cases. The amended complaint substantially broadened the class to include all FICI, FIE, FIRE and Mid-Century homeowners and automobile insureds. The amended complaint asserted claims against FGI, FICI, FIE, FIRE, FUA and Mid-Century. See, Plaintiffs’ Consolidated and Amended Class Action Complaint (doc. no. 493); Ex. 12 to Snider Decl. (doc. no. 947); Ex. 1 to Plaintiffs’ Response.

E. Other Class Action Complaints Filed

Douglas Ashby filed a class action lawsuit against FGI in the District of Oregon on September 28, 2001. See, Ex. 2 to Plaintiffs’ Response (doc. no. 952). The putative class was defined in the complaint as “all persons who purchased automobile, homeowner’s or landlord protection insurance policies from defendant’s subsidiaries from March 2000 to date.” Id. The Ashby complaint was amended on April 1, 2002 to include persons who had purchased personal lines of insurance from October 28, 1999 to date. The Ashby complaint was again amended on May 23, 2003 substituting Farmers Insurance Company of Oregon as the defendant. The putative class was limited to persons who had purchased insurance policies from Farmers Insurance Company of Oregon. The complaint was further amended on June 15, 2006 (bringing FGI back in as a defendant) and on September 28, 2007. See, Ex. 1 to Plaintiffs’ Response (doc. no. 952).

On July 15, 2002, Ed Clark sued FGI, FIE, Mid-Century Insurance Company of Texas and Farmers Texas County Mutual Insurance Company in the Western District of Texas. The putative class was defined as:

All insureds or applicants for property or casualty insurance with the insurance subsidiaries of Farmers Group, Inc., and Farmers Insurance Exchange throughout the United States who, based in whole or in part upon information contained in a consumer report on the insured or applicant obtained by defendants, were advised by defendants that they were either: 1) rejected for an insurance policy; 2) transferred to another Farmers’ subsidiary at a higher premium; 3) charged a higher premium with the same Farmers’ subsidiary; or 4) were required to pay additional upfront premiums, and who received no contemporaneous notice from defendants of such adverse actions, including the information necessary under the Fair Credit Reporting Act, 15 U.S.C. § 1681m.

See, Class Action Complaint (doe. no. 318); Ex. 1 to Plaintiffs’ Response (doc. no. 952). The complaint was amended on February 11, 2003 to include in the class all insureds or applicants who were quoted a premium that was adversely affected by their consumer report, to add FUA and FIE as defendants, and to include some additional plaintiffs. See, Amended Complaint (doc. no. 403); Ex. 1 to Plaintiffs’ Response (doc. no. 952).

On October 27, 2003, Ellery H. Ross sued Mid-Century on behalf of himself and a class defined as:

[Cjonsumers who have been subjected to an adverse action by Defendant based in whole or in part upon information from a CRA or review of a consumer report which was not disclosed to the consumers in accordance with the requirements of the FCRA specifically 15 U.S.C. § 1681m(a).

See, Complaint (doc. no. 320); Ex. 1 to Plaintiffs’ Response (doc. no. 952).

II. Discussion

A. Statute of Limitations

Defendants contend that they are entitled to summary judgment as to all FCRA claims of plaintiffs Cearlock, Hancock and Hodnett and partial summary judgment as to certain FCRA claims of plaintiffs Corl and Watts on the grounds that defendants did not take adverse action against plaintiffs within the period prescribed by the statute of limitations.

(i). New-Business Insureds

The 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 consumer. 15 U.S.C. § 1681m(a). The notice to the affected consumer must point out the adverse action, explain how to reach the consumer reporting agency that reported on the consumer’s credit, and tell the consumer that he can get a free copy of the report and dispute its accuracy with the consumer reporting agency. Id. Adverse action taken by an insurer 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, in connection with the underwriting of insurance.” 15 U.S.C. § 1681a(k)(l)(B)(i) (emphasis added).

In Safeco Insurance Company of America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), the Supreme Court concluded that the determination of the initial rate charged for new insurance coverage may constitute adverse action. The Court concluded that “an increase in any charge ... for any insurance, existing or applied for,” § 1681a(k)(l)(B)(i), includes “a disadvantageous rate even with no prior dealing.” Id. at 63, 127 S.Ct. 2201.

Although an initial rate offer can be an “adverse action,” the notice called for under § 1681m(a) is required only when the adverse action is “based in whole or in part on” a credit report. Safeco, 551 U.S. at 63, 127 S.Ct. 2201. The Supreme Court stated that in “common talk,” the phrase “based on” indicates a but-for causal relationship and thus “a necessary logical condition.” Id. The Supreme Court therefore concluded that “an increased rate is not ‘based in whole or in part on’ the credit report unless the report was a necessary condition for the increase.” Id.

In Safeco, the Court also identified the benchmark or baseline for determining whether a first-time rate is a disadvantage increase. The government and respondent-plaintiffs in Safeco had argued that the baseline “should be the rate that the applicant would have received with the best possible credit score.” Safeco, 551 U.S. at 65, 127 S.Ct. 2201. The insurer, on the other hand, argued that the baseline “is what the applicant would have had if the company had not taken his credit score into account (the ‘neutral score’ rate [the insurer] used in [the insured’s] case).” Id. The Court concluded that the insurer had the better side of the argument. The Court reasoned that the “increase” baseline was more consistent with the understanding of causation it had discussed, “which requires notice under § 1681m(a) only when the effect of the credit report on the initial rate offered is necessary to put the consumer in a worse position than other relevant facts would have decreed anyway.” Id. at 65, 127 S.Ct. 2201. The Court therefore concluded that the baseline for determining whether a first-time rate is a “disadvantage increase” is the rate the applicant would have had if the company had not taken his credit score into account (the “neutral score” rate) rather than the rate the applicant would have received with the best possible credit score. Id. at 65, 127 S.Ct. 2201. Consequently, a rate initially offered for new insurance is an “increase” calling for notice under § 1681m(a) if it exceeds the neutral score rate. Id. at 65-66, 127 S.Ct. 2201.

In their summary judgment motion, defendants, citing in part to expert opinion, contend that in determining whether defendants took adverse action against a new-business insured, this court must compare a new-business insured’s premium charge using the insured’s FARA or FPRA code and the associated discount factor to the premium charge the new-business insured would have had using the FARA or FPRA code “N” and the associated discount factor. See, Redding Decl. ¶ 6; Declaration of John P. Tierney in Support of Defendants’ Motion to Amend the Class Definition (“Tierney Decl.”), ¶ 6; Ex. 3 to Snider Decl. (doc. no. 947). According to defendants, the FARA and FPRA code “N” and its corresponding discount factor were assigned to those insureds without a consumer credit report from which to derive a credit-based insurance score (referred to as a “no hit”). Defendants maintain that the use of the FARA and FPRA “N” code and the resulting discount factor produces the rate charged “if the company had not taken [a] credit report into account” and is the premium charge “calculated without reliance on credit history.” Defendants argue that using the FARA and FPRA “N” code and factor as the baseline for determining whether a first time premium charge constitutes an adverse action is consistent with the “neutral rate” approved in Safeco. Consequently, defendants contend that they would only have taken adverse action against a new-business insured, thereby triggering notice under § 1681m(a), if the new-business insured’s premium charge was higher than the charge would have been using the FARA and FPRA code “N” and the corresponding discount factor. See, Tierney Deck, ¶ 6.

Plaintiffs, also relying upon expert opinion, contend that the neutral score within the meaning of Safeco is the premium weighted average FARA or FPRA factor calculated across all policyholders. See, Initial Report of Allan I. Schwartz (“Schwartz Report”), ¶ 4, Ex. 4 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911). Plaintiffs contend that the average FARA or FPRA factor is the truly “neutral score” because if every policyholder had that factor, it would result in the same overall premium to defendants. Plaintiffs assert that calculating average FARA and FPRA factors is not a novel concept for defendants. According to plaintiffs, when defendants implemented the FARA and FPRA programs, they represented to state insurance regulators that their programs were revenue-neutral— that the implementation of the programs would not result in additional revenue. Plaintiffs state that to demonstrate this revenue neutrality, defendants reported to state insurance regulators that they would need to raise their base rate by a certain percentage to offset the average FARA or FPRA discount. Plaintiffs assert, for example, that when FICI implemented its FPRA program in Arkansas, it told the state insurance department that it would implement a 27.3% FPRA code discount and a 37.6% base rate offset. In explaining these figures, FICI stated:

The “FPRA Base Rate Offset” is the amount of the increase in rates needed to offset the impact of automatically discounting our book for FPRA. That is, the average overall effect of discounting our book using FPRA is -27.3%. We want the impact of this change to be revenue-neutral, so we increase all base rates uniformly by form and territory by 37.6%, because this figure, when applied to the -27.3%, yields an overall 0.0% impact, on average, across the entire book. The impact on individual policyholders will be anywhere from -24.3% for the best risks (FPRA codes A through C) to +37.6% for the worst risks (FPRA codes 0 through Z)....

Ex. 5 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911). Plaintiffs contend that in Arkansas the average FPRA factor of .727 (corresponding to the 27.3% average discount) was the “neutral score” because defendants would receive the same overall premium if every policyholder had that factor applied in calculating his or her rate.

Additionally, plaintiffs point out that in 2002, Colorado implemented an insurance regulation which provided that when no insurance score could be generated or no credit information was available for an applicant or insured over age 65, the insurer had to treat the applicant or insured as if he had a neutral credit history or insurance score. According to plaintiffs, defendants represented to the Colorado state regulators that the FPRA discount factors for their error or problem codes, including the “N” code, “will be set at the state average level.” Furthermore, defendants represented this average to be the “Rate Neutral FPRA Discount Factor.” See, Ex. 6 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911). Thus, plaintiffs assert that defendants have calculated and applied average FARA and FPRA discount factors when they want to ensure that credit will not be used as a negative factor. According to plaintiffs, the average FARA and FPRA factors are what the Supreme Court had in mind in Safeco when it spoke of “identifying the benchmark for determining whether a first-time rate is a disadvantageous increase.” Safeco, 551 U.S. at 65, 127 S.Ct. 2201.

Plaintiffs assert that the “N” discount factor cannot be considered as the neutral score. According to plaintiffs, the “N” discount factor bears no resemblance to the neutral score in Safeco. Plaintiffs assert that the neutral score in Safeco was calculated from average loss ratios. See, Ex. 3 to Plaintiffs’ Motion to Amend Class Definition, JA-34, JA-45 (doc. no. 911). The “N” factor, plaintiffs contend, was not derived from any analysis of averages or rate neutrality. Moreover, plaintiffs contend that in many states including Arkansas, the “N” code was assigned a factor of 1.0-the same code used for the “Z” code which was used to calculate rates for the policyholders with the worst credit histories. Later, as defendants received pressure from agents and regulators, plaintiffs assert that the “N” factor was adjusted by defendants but not so as to correspond to any average or neutral scores across all policyholders. Rather, they adjusted the code to correspond to the expected losses from policyholders with that code. Plaintiffs further argue that a rate calculated using the “N” discount factor is a rate based on “information contained in a consumer report.” According to plaintiffs, the “N” factor is a based upon a communication from the consumer reporting agency that the insured does not have enough information on file for an insurance score. And this communication, plaintiffs assert, results in a premium calculation similar to those with the worst credit histories. Further, plaintiffs assert that using the “N” factor as a baseline would mean that either no policyholders would be entitled to notice under § 1681m(a) (because the “N” factor was assigned a factor of 1.0) or that many policyholders with worse-than-neutral FARA and FPRA factors would not be entitled to receive notice under § 1681m(a) (because the “N” factor was adjusted to better than 1.0 but not to the average FARA or FPRA factor).

Defendants, in reply, argue that nothing in Safeco requires that the neutral score comparison point for determining adverse action be an “average” score. Defendants contend that Safeco provided no substantive or objective “neutrality” standard for setting the adverse-action baseline. Defendants assert that rather than defining the neutral score by how it should be calculated, the Safeco Court defined the neutral score in terms of the persons to whom it is applied — those insureds who lack a credit report. Defendants maintain that the Supreme Court left to the states the obligation to place substantive limits on how persons without credit reports are charged, and that their rating system complied with the states’ requirements. Defendants point out that their “N” factors were filed with and approved by the states in which they were used. Defendants contend that their use of the average factor in Colorado does not support plaintiffs’ position that Safeco mandates use of an average factor. Defendants maintain that the use of the average factor was reached by agreement with the Colorado state regulators, and that in other states, the “N” factor that was filed and approved was not the average factor. Defendants contend that the “N” factor used in each state was neutral as defined by Safeco because it was used for insureds who had no credit report from which to derive a credit-based insurance score. Defendants contend that the “N” factor was calculated without reliance on credit history because “no hit” means there was no credit report and that the “N” factor is “what the applicant would have had if the company had not taken his credit score into account,” see, Safeco, 551 U.S. at 65, 127 S.Ct. 2201, and it is the “company’s assessment of the creditworthiness of a run-of-the-mill applicant who lacks a credit report,” id. at 72, 127 S.Ct. 2201 (Stevens, J., concurring). In addition, defendants point out that the Joint Appendix to the Safeco decision shows that insurer’s “neutral score” and its “no hit score” were the same — both were assigned the same credit weight of 65. See, Joint Appendix at JA-68, Ex. 3 to Tierney Decl. (doc. no. 917). Defendants also contend that the Joint Appendix also shows that the insurer’s neutral score was not average because the insurer’s “no hit score” — the same score as the “neutral score” — was described by the insurer as “slightly unfavorable based on [insurer] loss experience.” Id. at 71, 127 S.Ct. 2201. Defendants, citing to expert opinion, maintain that the “neutral” and “no hit” scores were consistent with a credit-based insurance score in the low 600s — a below-average score exceeded by 80 to 90 percent of the general population. See, Tierney Deck, ¶ 7. Thus, defendants contend that their “N” factor or the “no hit” factor is the neutral factor under Safeco and only those new business insureds charged more than the “N” factor are entitled to notice under § 1681m(a).

Upon review, the court concludes that the premium weighted average FARA and FPRA factor, as proposed by plaintiffs, should be utilized as “the benchmark for determining whether a first-time rate is a disadvantageous increase.” Safeco, 551 U.S. at 65, 127 S.Ct. 2201. Unlike the insurer in Safeco, defendants in the case at bar did not devise a method to neutralize an applicant’s credit score. However, as pointed out by plaintiffs, defendants, when required by Colorado to treat an applicant over the age of 65 as if he had a “neutral” credit history or insurance score when no insurance score could be generated, set their error or problem codes, including the “N” factor, at “the state average level.” Ex. 6 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911). Defendants therefore applied the average FPRA factor to ensure that credit information was not used as “a negative factor.” Id. And as pointed out by plaintiffs, defendants represented that their FARA and FPRA programs were “revenue-neutral,” and the application of the average FARA and FPRA factor to every policyholder would result in the same overall premium to defendants. If the court were to use the “N” factor as the baseline, as urged by defendants, large numbers of new-business insureds would not be entitled to any notice of adverse action under § 1681m(a) because the “N” code in many states received a factor of 1.0, which provided no discount from the premium base rate-thereby resulting in the highest premium. As stated by plaintiffs, the “N” code was treated like the “Z” code which was used for calculating rates for policyholders with the worst credit histories. Thus, use of the “N” code and factor would result in hyponotification rather than the hypernotification with which the Supreme Court was concerned. Safeco, 551 U.S. at 67, 127 S.Ct. 2201. Although the “N” factor was subsequently adjusted by defendants in many instances, the court nonetheless cannot conclude the “N” code and its corresponding factor should be considered the neutral score. Moreover, the court is not convinced that use of the FARA or FPRA “N” code and its corresponding discount factor would result in a premium charge “calculated without reliance on credit history.” See, Safeco, 551 U.S. at 54, 127 S.Ct. 2201. The court therefore concludes that the premium weighted average FARA or FPRA factor, rather than the “N” factor, is more consistent with Safeco as the benchmark for determining whether a first-time rate is a disadvantageous increase. The court therefore concludes that defendants took adverse action against a new-business insured if the new-business insured’s premiurn charge was higher than the charge would have been using the premium weighted average FARA or FPRA factor calculated across all policyholders, as proposed by plaintiffs. See, Schwartz Report, ¶ 4. Ex. 4 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911).

(ii). Renewal Insureds

In Safeco, the Supreme Court concluded that after the initial dealing between the consumer and the insurer, “the baseline for ‘increase’ is the previous rate or charge, not the ‘neutral’ baseline that applies at the start.” Safeco, 551 U.S. at 66, 127 S.Ct. 2201. Defendants state that in addition to defining the applicable baseline for measuring an increase after the initial transaction between the consumer and insurer, the Supreme Court in Safeco held that the “based on” language in § 1681m(a) requires a “but-for causal relationship” between the consumer report and an “increase in any charge for ... insurance” for an adverse action to occur, thereby triggering a notice obligation. Defendants therefore contend that under Safeco they did not take adverse action against any insured in charging a renewal premium unless (1) they increased the insured’s premium charge over the prior premium charge; and (2) the premium charge increase was caused by the insured’s credit-based insurance score. To satisfy this two-part test, defendants assert that it is necessary to determine whether a renewal premium charge actually increased over a prior premium charge and to ascertain whether that premium increase was caused by the insured’s FARA or FPRA discount factor or by some other cause. Defendants contend that as applied to their rating system, the causation analysis turns on whether the renewal premium charge was the first renewal premium charge involving the application of a FARA or FPRA factor (the “transition renewal”), or a premium increase over a prior renewal premium charge that was set using a FARA or FPRA factor (the “subsequent renewal”).

(a). Transition Renewal

According to defendants, at transition renewal, an insured’s premium increase caused, in whole or in part, by a base-rate offset in excess of the insured’s FARA or FPRA discount may be considered a premium increase caused by the FARA or FPRA factor. By way of illustration, defendants state that FICI began using FARA discount factors in Arkansas on January 1, 2001. According to defendants, at that time, FICI increased base rates by 3.9 percent to take into account the new FARA discounts (the base rate offset). Taking into account the effect of the 3.9 percent base rate offset and the various FARA discount factors, defendants state that FARA discount factors had the following effect on FICI renewal automobile premiums the first time a FARA discount factor was applied to the policy (the “transition renewal”), all else being equal:_

Defendants thus contend that FICI automobile insureds in Arkansas who had a renewal premium increase at transition renewal and who were assigned FARA codes E or H-Z had a premium increase of 3.9 percent due to their FARA factor. Defendants, however, contend that FICI automobile insureds assigned FARA codes AD or F-G did not have a premium increase. According to defendants, those insureds had premium decreases at transition renewal due to their FARA factors, ranging from 16.9 percent to 1.3 percent. See, Wehmueller Deck, ¶ 4 (doc. no. 946). Consequently, defendants contend that in Arkansas only automobile insureds with FARA codes E or H-Z can be considered as having had adverse action taken against them at transition renewal.

In addition, for illustration, defendants state that FICI began using FPRA discount factors in Arkansas on April 16, 2002. According to defendants, at that time, FICI requested and Arkansas insurance regulators approved a base rate offset of 37.6 percent to implement the FPRA discount factors. At the same time, Farmers applied for and the state approved a 41.8 percent base rate increase for other reasons. Defendants maintain that isolating the effect of the base-rate offset upon implementation of FPRA in Arkansas, renewing FICI homeowners insureds with FPRA codes A-D, F-L and N received premium decreases of between 24.3 percent and 7.8 percent due to their FPRA factor at transition renewal, all else being equal. FICI homeowners insureds with FPRA codes E, M, and O-Z had premium increases of 37.6 percent due to their FPRA code and factor at transition renewal, all else being equal. This is summarized as follows:_

See, Wehmueller Decl., ¶ 5 (doc. no. 946). Thus, defendants contend that at transition renewal in Arkansas, FICI homeowners insureds who had a premium increase and were assigned FPRA codes E, M, or O-Z had a portion of their premium charge increased due to their FPRA factor. FICI homeowners insureds assigned FPRA codes A-D, F-L, or N at transition renewal did not. See, Tierney Deck, ¶ 14, Ex. 3 to Snider Deck (doc. no. 947).- Consequently, defendants contend that in Arkansas only homeowners insureds assigned FPRA codes E, M or O-Z had adverse

action taken against them at transition renewal.

Plaintiffs agree that after the initial dealing between the policyholder and the insurer, the baseline for determining an “increase” in premium is the policyholder’s previous rate rather than the “neutral score” baseline. Plaintiffs acknowledge that under Safeco, only those policyholders who saw their premiums increase are entitled to an adverse action notice. Plaintiffs likewise acknowledge that an increase in premium does not end the inquiry. However, plaintiffs argue that the increase in premium must only be “based in whole or in part” on any information contained in a consumer report. 15 U.S.C. § 1681m(a). In support of their argument, plaintiffs rely upon the following language in Safeco wherein the Supreme Court stated:

[N]ot all “adverse actions” require notice, only those “based ... on” information in a credit report. Since the statute does not explicitly call for notice when a business acts adversely merely after consulting a report, conditioning the requirement on action “based ... on” a report suggests that the duty to report arises from some practical consequence of reading the report, not merely some subsequent adverse occurrence that would have happened anyway. If the credit report has no identifiable effect on the rate, the consumer has no immediately practical reason to worry about it (unless he has the power to change every other fact that stands between himself and the best possible deal); both the company and the consumer are just where they would have been if the company had never seen the report. And if examining reports that make no difference was supposed to trigger a reporting requirement, it would be hard to find any practical point in imposing the “based ... on” restriction. So it makes more sense to suspect that Congress meant to require notice and prompt a challenge by the consumer only when the consumer would gain something if the challenge succeeded.

See, Safeco, 551 U.S. at 63-64, 127 S.Ct. 2201. Plaintiffs assert that under the Supreme Court’s standard in Safeco, determining whether an increase in premium for defendants’ renewal policyholder was “based in whole or in part on” information in a credit report is simple. Plaintiffs state that under defendants’ rating system, a policyholder with a better (lower) FARA or FPRA factor will pay a lower premium with all other things being equal. Therefore, plaintiffs assert that if a policyholder renews his policy and the premium is calculated using a FARA or FPRA factor other than the most favorable factor, any increase in premium will necessarily be based at least in part on information contained in his credit report. In other words, had the policyholder’s credit report been more favorable, defendants would not have increased the premium or at least the premium increase would have been less.

To illustrate, plaintiffs assert that plaintiff Hancock was charged $255.00 for her automobile policy issued on April 4, 2001. When she renewed her policy on October 4, 2001, defendants increased the policy premium to $315.20. Plaintiffs contend that at the time of her renewal, plaintiff Hancock was assigned a FARA code of “D” and a FARA factor of .77 was used to calculate her premium. Plaintiffs contend that had the information in her credit report been more favorable, she could have been assigned a FARA code of “B” (or “A”) and a FARA factor of .70 would have been used, resulting in a lower premium because of a higher discount. Hence, plaintiffs argue that the credit report of plaintiff Hancock had an “identifiable effect on the rate,” see, Safeco, 551 U.S. at 64, 127 S.Ct. 2201, charged by defendants. Plaintiffs further argue that plaintiff Hancock had an “immediately practical reason to worry about it,” see, id., and if she were to improve her credit report or to challenge the information in her credit report, she “would gain something if the challenge succeeded,” see, id., — a lower premium.

Plaintiffs contend that defendants’ proposal ignores the Supreme Court’s discussion relating to the “based ... on” requirement. Plaintiffs contend that defendants only want to send adverse-action notices to insureds with premium increases “caused by the insureds’ FARA or FPRA factor.” Plaintiffs assert that at transition renewal, defendants believe adverse-action notices should only be sent to those policyholders with premium increases who received less than the average FARA or FPRA discount. But such proposal, plaintiffs argue, will cause policyholders such as plaintiff Hancock to see their premiums increased and not be told that their credit report is having an “identifiable effect on the rate.” See, Safeco, 551 U.S. at 64, 127 S.Ct. 2201. Plaintiffs contend that in such cases “the self-help mechanism embodied in the FCRA’s scheme of adverse action notices and the right to dispute” which is so “critical” to the purpose of the FCRA will be defeated. See, Ex. 14 to Plaintiffs’ Motion to Amend Class Definition (doc. no. 911).

Defendants, in reply, argue that Safeco requires a but-for causal relationship between the premium increase and an insured’s consumer credit report for an adverse action to occur. Defendants point out that the Supreme Court stated that the credit report must be a “necessary condition of the increase.” See, Safeco, 551 U.S. at 63, 127 S.Ct. 2201. Defendants contend that plaintiffs ignore Safe-co’s causation requirement by arguing that a premium increase can be “based on” a credit report even if the increase was not “caused by” the credit report. Defendants assert that plaintiffs’ analysis overstates the impact of the insured’s credit report on his or her policy premium. According to defendants, a premium increase at renewal may be due to any number of factors that have nothing to do with the insured’s credit report. For example, defendants assert that if defendants increased automobile insurance base rates in Oklahoma by 20 percent due to non-credit factors, all automobile insureds in Oklahoma would have a 20 percent increase in their premium charge regardless of their credit-based insurance score and resulting FARA discount. Such a premium increase, defendants argue, would have nothing to do with an individual’s credit report. But under plaintiffs’ test, defendants argue, every insured who did not have the best FARA discount would have suffered an adverse action due to his statewide base rate increase, regardless of the insured’s credit report information or corresponding credit-based insurance score and Oklahoma insureds would be deluged with FARA notices, resulting in hypernotification. Defendants point out that plaintiffs’ less-than-the-best-factor argument was rejected in a similar case, Ashby v. Farmers Insurance Company of Oregon, 565 F.Supp.2d 1188 (D.Or.2008). Further, defendants point out that plaintiffs’ policy argument to support their actual-increase-plus-less-than-the-best-discount analysis (that adverse action notices might cause insureds to check their credit report, find errors and obtain a lower premium) was made and rejected in Safeco. See, Safeco, 551 U.S. at 66-67, 127 S.Ct. 2201.

Upon review, the court concludes that defendants’ position is more consistent with the teaching of Safeco. The court concludes that the premium increase at transition renewal must bear a but-for causal relationship to the insured’s credit report. The increase must be “caused by” the FARA or FPRA factor. Therefore, as articulated by defendants’ expert, “an insured’s premium increase at transition renewal caused by a base rate offset in excess of the insured’s FARA or FPRA discount may be considered a premium increase caused by the FARA or FPRA factor.” See, Tierney Decl., ¶ 13, Ex. 3 to Snider Deck (doc. no. 947). Expressed mathematically, “the inverse of the policyholder’s FARA or FPRA factor (1.0 divided by the policyholder’s FARA or FPRA factor) is less than the base rate offset (1.0 plus the base rate offset percentage) applied at implementation of FARA or FPRA in a given state.” Id.

(b). Subsequent Renewals

For a renewal premium increase to have been caused by an insured’s FARA or FPRA factor at subsequent renewal, defendants contend that three conditions must have been met: (1) the insured’s premium must have increased over the prior renewal premium charge; (2) the increase must have been accompanied by a worsening of the insured’s credit-based insurance score; and (3) the lower credit-based insurance score must have caused a negative change in the insured’s FARA or FPRA factor discount.

Plaintiffs do not agree with defendants’ proffered test for subsequent renewals. They argue that this test, which requires a policyholder to have an increase in premium based on a worse credit score, ensures that very few policyholders will ever receive an adverse action notice after the transition renewal because defendants obtain a new credit report on customers only once every three years. Moreover, plaintiffs assert that under their test, defendants could assign a policyholder a worse FARA or FPRA code or raise a policyholder’s FARA or FPRA factor to cause an increase in the premium without ever sending an adverse-action notice, so long as they did not obtain a new credit report for the policyholder or so long as the policyholder’s credit score does not materially worsen. According to plaintiffs, defendants’ test is under-inclusive. Therefore, plaintiffs urge that if the court accepts defendants’ argument that a renewal increase must be “caused by” the insureds’ FARA or FPRA factor, adverse action notices should be sent to any subsequent renewal customer with an increase in premium that was calculated using (a) a FARA or FPRA factor higher than that used in the prior policy or (b) a FARA or FPRA factor that is worse relative to the neutral FARA or FPRA factor than that used in the prior policy.

To illustrate, plaintiffs assert that if a policyholder had a FARA factor of .50 in one policy for an “L” FARA code, but a FARA factor of .75 in the next policy period for the same “L” FARA code, that policyholder would be entitled to notice of an adverse action. Similarly, plaintiffs assert that if a policyholder had a FARA factor that was ten percent higher than the neutral FARA factor in one policy period, but a FARA factor that was twenty percent higher than the neutral in the next (even if the FARA code had not changed), that policyholder would likewise be entitled to notice of adverse action. Use of these two tests, plaintiffs argue, will ensure that adverse action notices are sent whenever the impact of defendants’ credit scoring program on a policyholder’s premium has an adverse effect.

Defendants argue that plaintiffs’ two-part alternative test for the subsequent renewals is wrong. Defendants assert that plaintiffs’ first test would include any insured who had a higher FARA or FPRA factor than was used during a prior policy period. But this is over-inclusive, defendants argue, because it would result in a finding of adverse action based upon a classification change that has nothing to do with an insured’s credit report or a credit-based insurance score. Moreover, defendants contend that this test would require defendants to send a FCRA notice to those with the best rates (if it reduced the discount for FARA code “A” from .80 to .85) and such result is contrary to Safeco. Plaintiffs’ second test is wrong, defendants argue, because comparing an insured’s FARA or FPRA factor at a subsequent renewal to the average FARA or FPRA factor at renewal would have nothing to do with the insured’s individual credit report and its impact on the premium. Defendants contend that unlike the first time a FARA or FPRA factor is applied to an insured’s renewal policy at transition renewal, any global changes to FARA or FPRA factors at subsequent renewals that changed the average FARA or FPRA factor would constitute classification changes unrelated to an individual insured’s credit report. Defendants however assert that under plaintiffs’ second test, adverse action would be based upon how an insurer treats other insureds using credit report information — not how the insured’s credit report imp