View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
  2. Law, regulation and tax
October 18, 2011updated 13 Apr 2017 8:47am

Discretionary clauses banned in California

Discretionary clauses in life, health and disability policies became a thing of the past in California in early-October when the US states governor signed into law Senate Bill 621 (SB621) SB621 protects consumers of life, health and disability insurance from discretionary clauses in their insurance policies which give the insurer the sole discretion to decide if a beneficiary has become disabled, even if the consumer has a doctor certify that they are disabled," said Jones in a statement

By LII editorial

Discretionary clauses in life, health and disability policies became a thing of the past in California in early-October when the US state’s governor signed into law Senate Bill 621 (SB621). It was a victory for the author of the bill, California insurance commissioner Dave Jones

“SB621 protects consumers of life, health and disability insurance from discretionary clauses in their insurance policies which give the insurer the sole discretion to decide if a beneficiary has become disabled, even if the consumer has a doctor certify that they are disabled,” said Jones in a statement.

He continued that insurers have increasingly relied on discretionary clauses to reject legitimate claims for disability insurance when a policyholder becomes disabled.

“Insurers know that many consumers will give up their claim and that those who challenge the claim denial face a very high legal burden to overcome the denial since the discretionary clause vests sole discretion in the insurer to decide if the consumer is disabled,” Jones said.

California became the 24th state to prohibit discretionary clauses in accordance with a model act introduced by the National Association of Insurance Commissioners in 2002.

State insurance commissioners’ right to prohibit discretionary clauses was upheld by the US Supreme Court in December 2010.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Life Insurance International