If the Court upholds the 9th Circuit's expansive definition of “willful,” the preview said, “lenders may be exposed to staggering liability and administrative costs.”

Maureen Mahoney, representing Safeco, told Justice Ruth Bader Ginsburg that two class action lawsuits have already been filed in the case, and with the potential that, under the law, consumers could be awarded $1,000 each if an adverse action notice was not sent, insurers could be liable for ” billions of dollars” in claims.

She also told the Court that if the 9th Circuit decision stands, Safeco will have to provide the notice to 80 percent of customers, and GEICO to 90 percent of its customers.

This would be the outcome, she said, despite the fact that credit scores constitute only one of 15 criteria used in determining a rate for a personal lines insurance policy.

A lawyer for the consumer plaintiffs argued that adverse notices would prompt consumers who receive them to determine if their credit ratings were accurate.

Justice Stephen Breyer disagreed. “This will result in the need for tens of millions of notices to be sent out,” he said. “It will have the same effect as consumers receiving privacy notices. It will become meaningless and they will all wind up in the waste basket.”

Regarding the expansive notification views implied in the 9th Circuit decision, “I don't understand where that comes from,” Justice Samuel Alito told Scott Shorr, of Portland, Ore., lawyer for plaintiff Ajene Edo of Portland.

The 9th Circuit's decision came in a case last January in which the court found defendants such as Safeco, GEICO and The Hartford acted “in willful disregard” of the Fair Credit Reporting Act in not disclosing that the best rate was not charged a consumer, and as a result, the consumers involved have the right to recover damages.

Responding to concerns by Chief Justice John Roberts, Justice Alito, Justice Breyer and Justice John Paul Stevens about the practical impact if the 9th Circuit decision is upheld, Mr. Shorr responded, “That is what the law requires.”

The justices also voiced a number of concerns about the 9th Circuit's interpretation that insurers acted “willfully” when they didn't send out adverse action notices in every case where a consumer did not get the best rate on an insurance policy.

The justices noted in their comments that there were no judicial or regulatory interpretations of what constituted “willful,” nor was there clear congressional intent that failure to provide notices in such cases constituted a “willful” violation of the law.

They also suggested that perhaps it would be more appropriate if a baseline level triggered an adverse action notice, with mailings going only to those who fell below an average credit rating, as an example.

Kathleen Jensen, senior legal counsel and a director for Property Casualty Insurers Association of America, said after the oral arguments that if the justices decide the case on the adverse action issue, “the Court doesn't necessarily have to address the 'willful' issue.”

But, she added, it is more likely that the Court will also address the “willful” issue in its decision based on the fact that the justices were explicit in saying that the court had not interpreted what constituted “willful” in prior decisions.

David Snyder, American Insurance Association vice president and assistant general counsel, noted that the justices had questioned the standard for “willful” damages, whether those damages are justified, and the practical and legal issues in sending adverse action notices in a much broader context as defined by the Ninth Circuit.