id. at 630. In this case, plaintiff seeks to characterize his status as a partner of an HIV-positive individual as a "personal characteristic" under Harris.
As Prudential notes, however, the Unruh Act does not prohibit discrimination based on one's marital or partner status. See Beaty v. Truck Ins. Exch., 6 Cal. App. 4th 1455, 8 Cal. Rptr. 2d 593 (1992) (finding that refusal to issue unmarried homosexual couple a joint policy did not violate Unruh Act, where insurer uniformly rejected all unmarried applicants, homosexual or not). Prudential further argues that it did not deny plaintiff's application based on his status, but rather on his risky conduct, that is, having sexual relations with an HIV-infected individual. The Unruh Act does not prohibit discrimination against persons based upon their conduct, but only prohibits that discrimination resulting from the individual's membership in a particular class of persons.
See Gayer v. Polk Gulch, Inc., 231 Cal. App. 3d 515, 282 Cal. Rptr. 556, 562 (1991) (finding that plaintiff, who had earlier filed a discrimination suit against a bar, could not bring a § 51 action against it because of the bar's refusal to serve him, where subsequent acts of discrimination merely responded to plaintiff's conduct in filing suit).
With state law avenues blocked, plaintiff can alternatively argue that Prudential's reliance on § 501(c) constitutes a "subterfuge" to avoid the antidiscrimination provisions of the ADA. Defining what constitutes a "subterfuge" obviously raises difficult questions, particularly in light of the paucity of case law on the matter. The legislative history, however, suggests the propriety of a broad definition of the term. In supporting the bill, senior members of the House and Senate Judiciary Committees have noted that "subterfuge" does not imply that a court must find "malicious intent" on the part of the insurer to make the latter liable under the ADA. 136 Cong. Rec. H4624 (daily ed. May 17, 1990) (statement of Rep. Edwards); 136 Cong. Rec. S9697 (daily ed. July 13, 1990) (statement of Sen. Kennedy).
House drafters simply intended the subterfuge provision to assure that an insurer's "refusal, limitation [of coverage], or rate differential is based on sound actuarial principles, or is related to actual or reasonably anticipated experience." H.R. Rep. No. 485, pt. 3 at 70, reprinted in 1990 U.S.C.C.A.N. 267, 493. Interpreting the entire subsection § 501(c), the House conferees intended to require that "the standards used [in underwriting be] based on sound actuarial data and not on speculation." Id.; see also id. pt. 2 at 138, 1990 U.S.C.C.A.N. at 421 (requiring insurers undertake risk underwriting "in accordance with accepted principles of insurance risk classification").
Borrowing from this language, the Court can fashion a legal standard by which to evaluate the facts of this case: insurers retain their § 501(c) exemption so long as their underwriting decisions are in accord with either (a) sound actuarial principles, or (b) actual or reasonably anticipated experience.
Prudential alleges that it bases its underwriting practices on "medical principles establishing that, as a group, these individuals [who engage in sex with HIV-positive partners] present a greater risk of becoming infected with HIV . . . than does a group where neither sexual partner is HIV-positive." (Grigg Decl. P 7; see also Bennett Decl. P 4.) Assuming that Prudential rejected plaintiff's policy application on this basis alone -- as the Court must in the absence of any additional evidence -- Prudential views the issue too narrowly. The mere fact that a particular individual presents a greater risk does not compel the conclusion that the individual presents an uninsurable risk. Common sense suggests that an insurer that confronts a heterogenous pool of applicants merely consults actuarial tables to adjust its rates to account for varying levels of risk presented by those applicants. Indeed, Prudential's practices typically conform with this logic, as the company admits that it charges about 10 percent of its applicants a premium commensurate with the additional risk that those applicants bring to its pool. (Grigg Decl. P 5.) Yet Prudential offers no actuarial or other data to justify its outright rejection of plaintiff's policy application. As one court noted in a case involving an insurer's rejection of an AIDS-afflicted plaintiff in the group life insurance context:
The ADA explicitly allows some disability-based distinctions within insurance policies to be drawn by insurers. However, total denial of . . . coverage to an individual does not implicate risks. In other words, disability-based distinctions are only relevant when some coverage is extended to an individual with disabilities. No actuarial risk makes someone uninsurable.
Anderson v. Gus Mayer Boston Store, 924 F. Supp. 763, 779 (E.D. Tex. 1996) (footnote omitted). Although the instant dispute involves the refusal to issue individual coverage, as opposed to the extension of group coverage to an individual, Anderson's logic applies with equal force here.
More important, Prudential does not point to any specific evidence to support this assertion. It argues that it need not offer specific actuarial data to support its decision where it seems so obviously supported by "accepted medical principles" and common knowledge about AIDS and its associated mortality risks.
(Def.'s Reply at 6, n.4.) The Court disagrees. Though Prudential can meet its initial burden as a Rule 56 movant without presenting evidence that negates plaintiff's claim, see Celotex, 477 U.S. at 323, plaintiff has demonstrated the existence of a material dispute as to whether Prudential based its decision upon sound actuarial principles or reasonably anticipated experience. In response to plaintiff's showing, Prudential must point to data, studies, or other information relevant to its risk assessment in order to establish the absence of a dispute of material fact.
Specifically, plaintiff discharged his burden by pointing to deposition testimony from Prudential underwriters who "admitted that they either did not recall seeking or definitely did not seek information outside of their own knowledge regarding HIV. None of them recalled specifics of any special training relating to HIV or its transmission, and only one of them had any medical training." (Pl.'s Opp'n at 11:15-21; see Doskow Decl., Exs. B, C, D, E.) Plaintiff further asserts that none of the key Prudential employees "consulted medical literature, epidemiological experts, or even in-house actuaries," in deciding to reject plaintiff's application. (Pl.'s Opp'n at 4:1-2.) Plaintiff also points to the declaration of Harry Woodman, a former Chief Underwriter at New York Life, with forty-six years of underwriting experience. Woodman alleges that "in order to make a decision based on sound actuarial reasoning and on a legitimate basis, Prudential should have evaluated [plaintiff's] actual risk of contracting HIV before making a final decision on his application." (Woodman Decl. P 3.) Woodman concludes that he would have offered plaintiff an insurance policy had he been confronted with the same application. (Id. P 10.)
Not only does the evidence suggest that Prudential did not base its decision on sound actuarial data, but the rejection of his application may not have accorded with reasonably anticipated experience. Prudential's review of plaintiff's medical records could only have revealed that plaintiff engaged in "safe sex" -- that is, protected sex -- with an HIV-positive partner. Plaintiff's blood test results remained HIV-negative. Despite that fact, Prudential does not offer any evidence that one has a heightened risk, let alone a uninsurable risk, of contracting HIV by engaging in protected sex. Persons such as plaintiff, who took the initiative to report the nature of his sexual activity to his doctor, could conceivably have a lower likelihood of contracting the virus than someone who does not regularly see a doctor, does not seek medical advice, and does not purport to take precautions before engaging in sexual activity.
Of course, plaintiff could become infected with the HIV virus in spite of his apparent precautions. In Prudential's most specific allegation on the topic, its Director of Medical Services, Dr. Amy Bennett, states that "because the HIV retrovirus becomes incorporated into the genome of the host's immune cells, it is extremely difficult to develop antiviral chemotherapeutic agents or vaccines to eradicate the disease." (Bennett Decl. P 3.) But the medical profession need not eradicate the disease to enable HIV-infected persons to enjoy a life of a reasonably lengthy duration. As Woodman notes, the recent development of antiviral drugs and other medications have enabled persons who contract the HIV virus to live another twenty-five years after exposure. (Woodman Decl. P 6.) In particular, the recent use of protease inhibitors in combination with other antiviral treatments has reduced the presence of the HIV virus to undetectable levels in some patients. See Christine Gorman, "A New Attack on AIDS Multidrug Therapy Seems to Offer the Best Hope so Far of Beating Back the Deadly Virus," Time, Vol. 148, No. 3, July 8, 1996 at 52.
If one can live many years after infection, such persons as plaintiff hardly present uninsurable risks for a life insurance company. New York Life's decision to issue plaintiff two individual policies in 1996, in spite of New York Life's full knowledge of plaintiff's sexual activities, bolsters this conclusion.
In light of the conflicting evidence, Prudential can only prevail if it provides the Court with facts sufficiently specific to convince the Court of an absence of disputed fact. The Court does not stand alone in demanding such a showing, as revealed by other courts that have addressed the question in the context of HIV-infected insurance applicants. Anderson, 924 F. Supp. at 779, and Piquard v. City of East Peoria, 887 F. Supp. 1106, 1125-26 (C.D. Ill. 1995). In Anderson, the court ruled against the defendant where its insurer "made no claim that it has conducted any . . . studies." In the context of an employer-sponsored group benefit plan, the court further opined that the ADA "puts the burden on those actors classifying risks to show both their rationality and permissibility." In Piquard, also a benefit plan case, the court required that an employer or the employer's insurer bear the burden of providing "risk assessment and actuarial data" to prevail on summary judgment. Id. at 1126. Although the court declined to reach the question of whether the "subterfuge" provision of the larger § 501(c) required a similar showing, the reasoning appears equally compelling in either context:
The EEOC explains [in its Interim Policy] that requiring the defendant to bear the burden of proof is consistent with the principle that the burden of proof should rest with the party who has the greatest access to the relevant facts. In the health insurance context, the defendant . . . has control of the risk assessment, actuarial, and/or claims data relied upon in adopting the challenged disability-based distinction. The plaintiff has no access to such data.
Id. at 1127 (citing Public Employees Retirement Sys. v. Betts, 492 U.S. 158, 181, 109 S. Ct. 2854, 106 L. Ed. 2d 134 (1989)).
Applicable regulations also support the imposition of a burden to provide data on the ADA defendant. The Department of Justice does not require insurance companies to include actuarial data with every rejection of an application because that "information would presumably be obtainable in a court proceeding where the insurer's actuarial data was the basis for different treatment of persons with disabilities." 29 C.F.R. Ch.I, Pt. 36, App. B, § 36.212 (1996). The passage continues, "because the legislative history of the ADA clarifies that different treatment of individuals with disabilities in insurance may be justified by sound actuarial data, such actuarial data will be critical to any potential litigation on this issue. " Id. (emphasis added).
It defies the spirit of the ADA for the Court to accept Prudential's proffer of vague explanations of the risks of HIV infection where the business of insurance requires sound risk assessment practices. Because plaintiff has pointed to evidence revealing the possibility of discriminatory denial of an insurance policy, Prudential can only prevail on summary judgment by coming forward with actuarial or other data supporting its actions.
Plaintiff also brings a claim for discrimination under the Unruh Act. Although the Court has already concluded that plaintiff cannot show how Prudential has directly violated the Unruh Act, there appears to exist a "federal-law back door" to § 51 liability. That is, the California legislature amended the Unruh Act in 1992 to provide that "[a] violation of the right of any individual under the Americans with Disabilities Act of 1990 . . . shall also constitute a violation of this section." Cal. Civ. Code § 51. Because the Court denies Prudential's motion for summary judgment as to the ADA claim, it must deny the motion as to the Unruh Act claim as well.
IT IS HEREBY ORDERED that:
1. Defendant's motion for summary judgment on plaintiff's claims for intentional infliction of emotional distress, negligent infliction of emotional distress, and violation of California Insurance Code § 10140 is GRANTED.
2. Defendant's motion for summary judgment of plaintiff's claims under the ADA and the Unruh Act is DENIED.
Dated: April 21, 1997.
William H. Orrick
United States District Judge