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CA Department of Insurance

Insurance Commissioner Jones Announces Passage of Bill to Prohibit Insurers from Overriding a Physician's Opinion and Deny Disability Coverage

News: 2011 Press Release

For Release: September 9, 2011
Media Calls Only: 916-492-3566
Insurance Commissioner Jones Announces Passage Of Consumer Protection Bill That Voids Discretionary Clauses In Life And Disability Insurance
Commissioner Urges Governor to sign SB 621

Today Insurance Commissioner Dave Jones announced that the Legislature has unanimously passed a bill sponsored by the Department of Insurance that would protect consumers from discretionary clauses in life and disability insurance, including health insurance policies. SB 621, authored by Senate Insurance Committee Chair Ron Calderon (D-Montebello), makes discretionary clauses in new or renewed policies void and unenforceable.  

Discretionary clauses are policy provisions that give the insurer discretion to interpret the policy and to decide if an insured is entitled to benefits. If the insurer decides to deny a claim the insured must show that the insurer's decision is arbitrary and capricious in order to overcome it - a very high hurdle to obtaining benefits or coverage. Insurance companies have used discretionary clauses to protect their decisions from being reversed by the courts. This practice has left many insureds without benefits at a time when they are sick, disabled, or grieving the loss of a loved one, and in dire financial need.

"Discretionary clauses give insurance companies the freedom to easily justify coverage denials when a policyholder takes an insurer to court over denied benefits and claims," said Commissioner Jones. "It's like the fox guarding the henhouse. This bill levels the playing field for consumers so they can have their day in court and get the benefits they paid for with their premiums."

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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2013 the California Department of Insurance received more than 170,000 calls from consumers and helped recover over $63 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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