In Farm Bureau Life Insurance Co. v. Chubb Custom Insurance Co. et al., the Iowa Supreme Court affirmed the district court’s ruling that Farm Bureau was not entitled to liability coverage in its disputes with two applicants that were HIV positive.

In the underlying action, two applicants applied to Farm Bureau for life insurance in 1999 but the applications were denied when their blood tests revealed that they were HIV positive. The insurance company did not inform the applicants of their HIV status and it was two years before they discovered that they had the virus. The applicants sued the insurer in 2002 initially alleging as causes of action the failure to inform of HIV status in violation of Wyoming statutory and common law, and then amending in 2005 to assert breach of fiduciary duty. The case settled in 2005. The life insurer did not notify its broker of a claim until February 2003 and the broker in turn did not notify at least one of its insurers until June 2005.

The life insurer subsequently sued its insurers and insurance broker, claiming entitlement to reimbursement for the costs of settlement.

Referring to the contractual obligation of the life insurer to strictly comply with the notice of claims provisions in its professional liability policy, the Court held that the notice was not timely and therefore no coverage was owed under the policy. As for the financial institutions and commercial umbrella general liability policies, both contained exclusions for bodily injury resulting from failure on the part of the life insurer to properly perform its role regarding insurance applications. The Iowa Supreme Court held that the exclusions were not ambiguous or illusory and that the policy language was straightforward in that it was “clearly and explicitly drawn to preclude coverage for the acts and omissions that form the basis for the [underlying] claims against [the insurer].”

A copy of the decision is available here.