Mike Quiat Comments:

            One of the most disturbing aspects of ERISA disability insurance law is the discretionary clause which plagues claimants in most states.  While 11 states have relieved their residents of this unfair burden by legally banning the clause, 39 states have failed to do so.  See list below.

  The discretionary clause gives insurance companies the right to determine which claims they will pay.  Because of judicial rulings interpreting the discretionary clause an impartial, judicial determination is extremely difficult to obtain for an ERISA claimant whose claim the insurer denies. 

            Having been instrumental in having the insurance authorities in New Jersey announce their strong opposition to the discretionary clause and to follow up with an administrative regulation outlawing the use of the clause as a matter of law, I am now trying to have the clause banned in all states in the interest of fairness and for the protection of their respective ERISA disability insurance consumers.

            To understand the need for such a campaign, one must understand that if there is no statute or properly approved administrative rule banning the use of the discretionary clause in insurance policies, then courts on appeal are bound to honor the insurer’s discretionary decision unless it is “arbitrary and capricious”, a standard a claimant is hard-pressed to prove in a court of law.

            To try to even things up for ERISA disability income insurance claimants so they get a fair shake on a claim, I am trying to get the New York State Insurance Department to issue an administrative rule banning the discretionary clause in New York.  One would think this would not be difficult after the Insurance Department clearly came down on the side of doing away with the clause in some statements it published in 2006.  The New York Insurance Department said, without reservation at that time, that the discretionary clause was against the public policy of the State of New York and should be prohibited.

It is now three years later and no action has been taken by State authorities which would legally and effectively do away with the discretionary clause for the benefit of New York citizens.  See the New York Law Journal article.  I intend to keep up the pressure until the Insurance Department or the New York Legislature takes the action necessary to legally rid the people of New York of this unfair policy clause once and for all.

            Meanwhile, I hope to inspire people in all other states to start petitioning their state insurance departments and their legislators to take binding legislative or administrative action to ban the unfair discretionary clause policy provision.  I would be happy to provide anyone undertaking this cause in his or her state with sample legislation or administrative rules to make their efforts easier.

            Our latest information shows the following states have legally banned the use of the discretionary clause by health insurance companies:

            California, Hawaii, Illinois, Indiana, Maine, Michigan, Montana, New Jersey, Oregon, Utah and Wyoming.  The 39 others have not.

            For your convenience in making your discretionary clause feelings known to the insurance authorities in your state, just click on your state for complete contact information.