Ruling OKs Policy Denial to AIDS Victim’s Family

An insurer can deny life insurance coverage to the family of an AIDS victim, a federal judge ruled Friday.

A company’s belief that an insurance applicant has a communicable disease, or is at risk of catching one, is not discrimination based on “physical impairment” under California law, U.S. District Judge Samuel Conti said.

The ruling involved a State Farm Life Insurance Co. practice that has since been changed, and an Alameda County family that reportedly found insurance elsewhere. But an advocate for the rights of AIDS patients said the decision allows arbitrary discrimination with no medical basis.

The federal judge’s ruling, based on California law, does not bind state courts, which have not yet resolved the application of anti-discrimination laws to AIDS insurance cases.

Mark White, a lawyer for State Farm, said the company’s policy on AIDS coverage was “not perfect or infallible.” But he denied that it was based on the notion, rejected by a consensus of the medical community, that acquired immune deficiency syndrome can be spread by casual contact.

“With regard to some children (of AIDS patients) there is a potential risk, because one of the recognized means of transmission of the virus is in utero, “ White said, acknowledging that the children in this case were not at risk.

He said the policy was “a generalization, an effort to identify a group of people who, as a group, are at special risk.”

Under the policy, anyone who had lived with an AIDS patient at any time during the previous five years was ineligible for life insurance.

White said that under the revised policy, the company will reconsider the application six to nine months after “the end of that relationship” and would take into account any test results the law allowed. A recent state law allows life insurance companies to require applicants to be tested for the AIDS virus.

The suit was filed by Katherine Murphy of Fremont and her two children, Zachary, now 19, and Benjamin, 11. They applied to State Farm for life insurance and were rejected in June, 1987, two months after Mrs. Murphy’s husband, Dean, had died of AIDS, which the family said he contracted in a blood transfusion.

White said State Farm was aware that the Murphys had tested negative for the AIDS virus but was then prohibited by California law from considering that information. He said the family later bought insurance from another company.