Texas insurance commissioner forbids discretionary clauses

Life insurance companies in Texas will no longer be able to rely on so-called discretionary clauses to deny claims. These clauses give insurance companies the right to deny claims based on their own interpretation of policy provisions. Such interpretations can be difficult to overturn in court.  A Dallas Morning News article focuses on the problem:

"Health, life and disability insurers will no longer have blanket authority to decide what their policies do and don't cover in Texas, under rules approved Monday by Insurance Commissioner Mike Geeslin.

The decision, which was sought by the state consumer advocate for insurance, ends long-standing provisions in most health and disability plans – called discretionary clauses – that give insurers the right to interpret their policies and decide what benefits must be paid.

In formally adopting the new rules, Geeslin wrote that the discretionary powers of companies "are unjust, encourage misrepresentation and are deceptive because they mislead consumers regarding the terms of coverage" in their policies.

Prohibiting those provisions, the commissioner said, will protect consumers from "incorrect and unfair coverage determinations by insurers and HMOs without a subsequent opportunity for a full and independent review" of their claims."

This decision by the Texas Insurance Commissioner was long overdue and levels the playing field somewhat between insurance companies and consumers.