NEW YORK, Nov 10 (Reuters) - Nationwide Mutual Insurance Co. said on Friday it will pay $19.25 million to settle a lawsuit accusing it of failing to tell policyholders it would raise auto insurance rates based on their credit reports.

Judge Anna Brown of the U.S. District Court in Portland, Oregon, approved the settlement on Thursday, court records show.

The settlement resolves a five-year-old class-action lawsuit against Nationwide, the No. 4 U.S. homeowner and No. 6 U.S. auto insurer, and its Amco Insurance Co. subsidiary.

A case involving similar issues and brought by Safeco Corp. (SAFC.O: Quote, Profile, Research) and Geico Corp., a unit of Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research), is set for oral argument on Jan. 16 before the U.S. Supreme Court.

In the Nationwide case, plaintiffs said insurers violated the Fair Credit Reporting Act (FCRA) by not disclosing that they were boosting premiums based on information in customers' credit reports.

About 65,000 policyholders will each receive checks of about $200 in the settlement, after legal and other expenses. The insurers did not admit wrongdoing.

"There have been rulings in the case that were adverse to and beneficial to Nationwide," said Brant Bishop, a partner at Kirkland & Ellis LLP in Washington, D.C. who represents Nationwide, in an interview. "Because of the uncertainty associated with litigation and interpreting the Fair Credit Reporting Act, Nationwide made a decision to settle."

Joe Case, a spokesman for Columbus, Ohio-based Nationwide, said settling was in the parties' best interests. Nationwide is the parent of Nationwide Financial Services Inc. (NFS.N: Quote, Profile, Research).

Steve Larson, a lawyer at Stoll Stoll Berne Lokting & Shlachter PC representing the plaintiffs, in an Oct. 20 court filing called the outcome "extraordinary."

The nation's highest court will in January consider whether to hold insurers liable for willfully violating the FCRA if they act with "reckless disregard" of the law, or if they must actually know their conduct violates the law.

Geico and Safeco are appealing a Ninth Circuit Court of Appeals decision in California adopting the reckless disregard test. Most federal courts that have considered the issue follow the actual knowledge test.

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By Jonathan Stempel

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