The latest decision has left the insurance industry in a quandary as to whether it should ask the entire 9th Circuit Court to review the decision en banc or await the decision of the lower court, according to Kathleen Jensen, a lawyer with the Property Casualty Insurers Association of America (PCI).

Ms. Jensen explained that despite the decision of the appellate court panel to back off from its most onerous conclusion as to the meaning of the Fair Credit Reporting Act (FCRA), there is language in the decision as to what should be in the notice that remains a problem.

"In the view of the industry, that is not in the FCRA," Ms. Jensen said. "So the court has pulled out of nowhere what needs to be in the notice," she said.

At the same time, language still remains in the opinion which says that any auto insurance company affiliate whose employees participate in the adverse underwriting decision must also sign the notice to the applicant or customer saying based on a credit rating the amount being charged is not optimum rate.

"Many companies have several affiliates," Ms. Jensen explained. "The court said any company within that group that had reason to participate in making that decision has to be included as participating in the decision in the notice to the consumer--even if the consumer wasn't applying for insurance from that company.

"We don't think that is an appropriate interpretation of the FCRA," Ms. Jensen said.

At the same time, Ms. Jensen noted, "many" insurance companies are acknowledging, allegedly based on the decision--Reynolds v. Hartford and Edo v. GEICO, No. 03-35695--"that an adverse action notice must be sent when an applicant for personal lines insurance merely asks for a quote."

The original decision in August by the panel that the FCRA requires customers be given notice when an insurer charges them a higher rate based on their credit record sent tremors through the industry.

The requirement applies regardless of whether it is a first rate or a renewal rate, the panel said. One of the reasons the industry is so concerned, according to PCI officials, is the potential for the decision to be adopted by courts across the nation.

That's because, as the panel noted in its decision, the case was one of "first impression"--in other words, the first time a federal appeals court has interpreted the definition of "adverse action" in the law--even though the law was enacted in 1970.

Furthermore, the decision by the three-judge panel said that under certain circumstances, failure to make such a disclosure is a "willful" violation of the law, allowing a consumer to sue for damages if the consumer can prove he was not informed.

It is this willful violation part of the decision that the panel has now asked the lower court to determine based on testimony in the case.

But the case does not apply to California, where under state law credit scores cannot be used by insurance companies.

The defendants, The Hartford and Geico, twice asked the full 9th Circuit to review the decision, backed by amicus briefs submitted by most property-casualty insurance trade groups. In both cases, in October and this week, the panel responded with new opinions that backed off incrementally from its original findings.

The first time, Judge Jay Bybee maintained his dissent with the willful language. In both the original ruling in August and in the first revised opinion in October, he argued that the issue of whether the insurers "willfully" violated FCRA by failing to provide the notices in the cases brought before the court should be determined by the trial court based on the facts in the case, not on the basis of "lawyers' arguments on appeal."

However, according to Ms. Jensen, Judge Bybee withdrew his dissent from the latest opinion.

The class action lawsuit was brought on behalf of all insurance customers by attorneys for a Portland, Ore., law firm. The decision also reinstates complaints against Farmers, State Farm and Safeco.