Klonsky v. RLI Insurance Company
Filing
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OPINION AND ORDER denying 6 Motion to Dismiss. Signed by Judge William K. Sessions III on 4/4/2012. (law)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF VERMONT
KACEY KLONSKY,
on behalf of herself and all
others similarly situated,
Plaintiff,
v.
RLI INSURANCE COMPANY,
Defendant.
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Case No. 2:11-CV-250
OPINION and ORDER
Plaintiff Kacey Klonsky filed suit on behalf of herself and
all others similarly situated, who have had their rights under
the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681,
violated by Defendant RLI Insurance Company (“RLI”).
RLI has
moved to dismiss Klonsky’s claim on two grounds: “(i) the motor
vehicle report (“MVR”) pertaining to Kacey Klonsky is not a
‘consumer report’ within the meaning of the FCRA . . . and (ii)
Kacey Klonsky’s FCRA claim against RLI is barred by the release
provisions of settlement documents entered into in connection
with a prior action” between RLI and her parents.”
Def.’s Mem.
1, ECF No. 7.
For the reasons that follow, RLI’s motion to dismiss is
DENIED.
FACTUAL BACKGROUND
The following facts were gleaned from the Class Action
Complaint (“Complaint”), and from the MVR.
In November 2008
Arthur Klonsky struck a pedestrian with his automobile, causing
the pedestrian serious injury.
Arthur’s wife, Jane Klonsky, was
a passenger in the car at the time.
Before the accident, RLI had issued Arthur Klonsky a
personal umbrella liability policy that included automobile
liability coverage.
As a result of the accident, the pedestrian
presented a claim against Arthur and Jane Klonsky to RLI.
This
claim eventually resulted in litigation between RLI and Arthur
and Jane Klonsky.
That litigation was settled pursuant to a
confidential agreement.
Arthur and Jane Klonsky have a daughter, Kacey Klonsky.
At
the time of the issuance of her father’s RLI policy, Klonsky was
a resident of the household of her parents, and was insured
under the policy.
However, because she was not involved in the
accident, no claim related to the accident was ever presented
against her.
Moreover, she was in no way involved in the
litigation between her parents and RLI.
Nonetheless, as part of the investigation of the claim
against Klonsky’s parents, in February 2009, RLI obtained an MVR
for Klonsky from a consumer report vendor.
Klonsky alleges that
RLI engaged in a practice to always check the driving records of
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all insured drivers on an insurance policy when a claim was
submitted against one or more insureds.
Klonsky further alleges
that the insureds are not informed that the records will be
obtained and do not provide consent.
The MVR at issue here contains some of Klonsky’s basic
identifying information, such as her name, date of birth, and
driver’s license number.
It also contains a section entitled
“Driving Record History,” which indicates that Klonsky has a
“clear record.”
report.
Klonsky did not consent to RLI obtaining this
Moreover, she alleges that “RLI certified to [the
consumer report vendor] that it was obtaining the driving record
solely for underwriting purposes,” but in fact obtained the
report in an attempt to determine if misrepresentations were
made on the application for her father’s umbrella policy.
(Complaint ¶¶ 25, 27, 29.)
In sum, Klonsky alleges that RLI
obtained her MVR and the MVRs of others similarly situated for
an impermissible purpose, in violation of the FCRA.
DISCUSSION
I. Motor Vehicle Reports as “Consumer Reports” under the FCRA
“The FCRA regulates access to individuals' consumer
reports,” and “[a]n entity may gain access to an individual's
consumer report only with the written consent of the individual,
unless the consumer report is to be used for certain permissible
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purposes.”
Dixon v. Shamrock Fin. Corp., 522 F.3d 76, 77-78
(1st Cir. 2008) (citing 15 U.S.C. § 1681b) (internal quotation
marks omitted).
Klonsky has alleged that RLI obtained her MVR
for an impermissible purpose, and thus violated the FCRA.
RLI
argues that Klonsky’s MVR is not a “consumer report” within the
meaning of the FCRA, and thus, that she has no claim under the
FCRA.
The FCRA defines a consumer report as
any written, oral, or other communication of any
information by a consumer reporting agency bearing on
a consumer's credit worthiness [sic], credit standing,
credit capacity, character, general reputation,
personal characteristics, or mode of living which is
used or expected to be used or collected in whole or
in part for the purpose of serving as a factor in
establishing the consumer's eligibility for—(A) credit
or insurance to be used primarily for personal,
family, or household purposes; (B) employment
purposes; or (C) any other purpose authorized under
section 1681b of this title.
15 U.S.C. § 1681a(d)(1).
Thus, to qualify as a consumer report,
Klonsky’s MVR must “‘bear on’ at least one of seven factors and
. . . be used, expected to be used, or collected for one of
three types of purposes.”
Trans Union Corp. v. FTC, 81 F.3d
228, 231 (D.C. Cir. 1996).
RLI concedes that “Klonsky’s Complaint alleges facts that
arguably satisfy the [second] half of the definition.”
Mem. 8 (citing Complaint ¶¶ 25-26.).
That is, Klonsky alleges
that RLI certified that it was collecting her MVR for
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Def.’s
underwriting purposes, and thus that her MVR was “used, expected
to be used, or collected for” one of the three permissible
purposes.
The question becomes, then, whether Klonsky’s MVR
“bear[s] on [her] credit worthiness, credit standing, credit
capacity, character, general reputation, personal
characteristics, or mode of living.”
As this Court has observed, “MVRs are considered to be
consumer reports when they are sold by state motor vehicle
departments for insurance underwriting purposes and contain
information bearing on a consumer's ‘personal characteristics,’
such as arrest information.”
RLI Ins. Co. v. Klonsky, 771 F.
Supp. 2d 314, 333 (D. Vt. 2011) (citing 16 C.F.R. Pt. 600, App.
§ 603(d)(4)(C)); Hodge v. Texaco, Inc., 975 F.2d 1093, 1095 (5th
Cir. 1992) (noting that the FTC has interpreted the FCRA to
apply to MVRs).
While the FTC’s interpretation of the FCRA does
not have the force of law, it should be viewed in light of the
fact that the Supreme Court has “long recognized that
considerable weight should be accorded to an executive
department's construction of a statutory scheme it is entrusted
to administer.”
Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984).
Based on the FTC’s
interpretation of the FCRA, and on a plain-language reading of
the statute, Klonsky’s MVR qualifies as a consumer report.
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Klonsky’s MVR provides her date of birth, driver’s license
number, license “class,” and license expiration date.
It also
provides Klonsky’s “driving record history” and states that she
has a “clear record.”
The information that Klonsky has a clear
driving record bears directly on her “personal characteristics.”
Specifically, it speaks to her competence and responsibility as
a driver.
Thus, it is a consumer report under the FCRA.
In support of its argument that Klonsky’s MVR is not a
consumer report, RLI cites to cases that hold that reports
containing only basic identifying information (such as name,
date of birth, address, and social security number) are not
consumer reports within the meaning of the FCRA.
See (RLI Ins.
Co.’s Mem. of Law in Support of its Mot. to Dismiss 12.) (citing
Smith v. Waverly Partners, LLC, 2011 WL 3564427, *5 (W.D.N.C.
Aug. 12, 2011); Individual Reference Svcs. Grp., Inc. v. Fed.
Trade Comm., 145 F. Supp. 2d 6, 17 (D.D.C. 2001)).
Those cases
are inapposite because the MVR at issue here contains
information beyond basic identifying information—it contains
information about Klonsky’s driving history.
Additionally, RLI argues that Klonsky’s MVR is not a
consumer report because it lacks “arrest information or other
information warranting an analogous level of societal
disapproval.”
(RLI Ins. Co.’s Mem. of Law in Supp. of its Mot.
to Dismiss 12.) (quoting Manso v. Santamarina & Assocs., 2005 WL
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975854, at *8 (S.D.N.Y. Apr. 26, 2005)) (internal quotation
marks omitted).
Relying on FTC commentary, Manso discussed MVRs
as consumer reports and suggested that “a motor vehicle is a
consumer report bearing on personal characteristics only in
cases such as those when the report refers to an arrest for
drunk driving, as opposed to those in which a report refers to a
less serious offense such as speeding.”
Manso, 2005 WL 975854,
at *8 (internal quotation marks omitted).
Of course, the FTC commentary on which Manso relied can
also be read to support the proposition that minor offenses such
as speeding bear on personal characteristics in the same way
that more serious offenses do.
Moreover, the Court notes that
that the absence of arrests for speeding, drunk driving, or
other moving violations bears as much on the personal
characteristics of a driver as would the presence of such
arrests.
It is logically inconsistent to argue that an MVR
which displays an arrest for drunken driving says something
about an individual’s personal characteristics, while
simultaneously arguing that an MVR which shows an absence of
such arrests says nothing about an individual’s personal
characteristics.
Because Klonsky’s MVR was ostensibly obtained for
underwriting purposes, and because the MVR’s indication that
Klonsky has a clear driving record bears on her personal
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characteristics, the MVR is a consumer report within the meaning
of the FCRA.
II. The Application of the Releases in the Prior Action
RLI also argues that Klonsky’s claim should be dismissed
because it is barred by the Confidential Settlement Agreement
and the supplemental Mutual Release (“Releases”) entered into by
her parents and RLI in their prior litigation.
Basic principles of contract law dictate that Kacey Klonsky
is not bound by the Releases in this matter.
“It goes without
saying that a contract cannot bind a nonparty.”
Waffle House, Inc., 534 U.S. 279, 294 (2002).
E.E.O.C. v.
Moreover,
“[s]ettlement agreements are not to be used as a device by which
A and B, the parties to the decree, can (just because a judge is
willing to give the parties’ deal a judicial imprimatur) take
away the legal rights of C, a nonparty.”
Davis v. Blige, 505
F.3d 90, 102-03 (2d Cir. 2007) (quoting Bacon v. City of
Richmond, 475 F.3d 633, 643 (4th Cir. 2007)) (internal quotation
marks omitted).
Klonsky was neither a party to the prior
litigation, nor to the Releases.
RLI argues, however, that Klonsky’s claim is barred
“because she was a third-party beneficiary under the personal
umbrella liability policy . . . that RLI issued to [her
parents],” and “[a]s a third-party beneficiary under the policy,
[Klonsky’s] rights cannot exceed those of her parents, the named
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insureds.”
Def.’s Reply Mem. 9, ECF No. 21.
RLI states that
Klonsky “cannot credibly argue that her FCRA claim does not
depend on the insurance policy in connection with which RLI
obtained her MVR in the first place.”
Id. 9-10.
True, RLI
likely never would have obtained Klonsky’s MVR were she not a
third-party beneficiary of her parents’ insurance.
However, her
claim here does not in fact depend on the policy.
It depends on
RLI’s actions, and on the FCRA.
Klonsky does not seek to
enforce rights bestowed by the policy, she seeks to enforce
rights bestowed by the FCRA.
Because basic principles of contract law dictate that the
Releases do not bind Klonsky, and because Klonsky’s status as a
third-party beneficiary to her parents insurance does not change
that facts, the Releases do not bar Klonsky’s claim.
CONCLUSION
For the reasons set forth above, RLI’s motion to dismiss is
DENIED.
Dated at Burlington, Vermont this 4th day of April, 2012.
/s/ William K. Sessions III_
William K. Sessions III
District Judge
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