Pehle v. Farm Bureau Life Insurance Co., 397 F.3d 897 (10th Cir. 2005)

Relying on Wyoming common law, the federal Tenth Circuit Court of Appeals concluded that if an insurance company’s HIV testing of a life insurance applicant reveals HIV infection, the insurance company has a duty to provide the applicant with enough information to encourage the applicant to find out why the application was denied. In this case, a couple applied for life insurance and were denied coverage when their HIV tests came back positive. The insurance company did not disclose the test results to the applicants, but instead indicated that the denial was based on the blood work and that they would disclose the results to the applicants’ physician with the applicants’ permission. The applicants did not follow up and only learned of their positive test results when one of them became ill two years later. The applicants sued the insurance company for negligence, arguing that the insurance company had a duty to inform them that they were infected with HIV. Relying heavily on the Wyoming Supreme Court’s decision in Duncan v. Afton, Inc., 991 P.2d 739 (Wyo. 1999), the court determined that “for negligence to lie, defendant must owe a duty to plaintiff, and defendant’s breach of that duty must be the proximate cause of the plaintiff’s injuries.” The court concluded that the insurance company did owe a duty to the applicants because the applicants put their trust in the company by submitting blood samples, because the company was purporting to act in the applicants’ best interests by encouraging them to buy life insurance. However, the court also concluded that whether the insurance company breached its duty, and whether the plaintiff’s injuries stemmed from that breach, were issues of fact to be determined by a jury.

Although the case was pursued in federal court, the decision was based solely on Wyoming law, and it is likely that the decision will have no effect outside of Wyoming. This is why the dissent writes that it would have been more appropriate to certify the question to the Wyoming Supreme Court than for the Tenth Circuit to rule on the question itself.