A federal court in Virginia recently held that an insurer had no duty to defend its insured against claims brought under the Fair Credit Reporting Act (“FCRA”). Liberty Mutual Fire Ins. Co. v. General Info . Services., Inc., 2014 WL 2114840 (E.D. Va. May 20, 2014).
Three individuals sued the insured, a background check service, alleging that it violated the FCRA by failing to establish reasonable procedures to assure that its background checks provided to prospective employers were accurate. The individuals also brought class action claims under the FCRA, alleging that the insured failed to provide notices and disclosures required by the FCRA. The service’s insurer sought a declaration that the policy did not cover any of the claims asserted and it had no duty to defend. The insured filed a counterclaim, seeking a declaration that the insurer did have a duty to defend.
Following a bench trial, the court found that the insurer had no duty to defend. As to the personal claims against the insured (for damages for “embarrassment, humiliation and other emotional and mental distress”), the court found that while such claims generally constitute “personal and advertising injury” within the meaning of the policy, because the conduct that was alleged to have caused those injuries occurred more than two years after the policy expired, there was no coverage. As to the class action claims (for statutory damages, punitive damages, and attorneys’ fees pursuant to the FCRA), the court found that the counts did not allege “personal and advertising injury” as defined by the policy, and thus there was no coverage.