"Discretionary clauses give insurance companies the freedom to easily justify coverage denials when a policyholder takes a carrier 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."

 

A discretionary clause allows the insurer to override an insured's own doctor's certification of disability benefits. The Insurance Commissioner currently has authority to challenge such clauses on a case-by-case basis, and while they are disfavored, they are not clearly banned under California law. This bill would prohibit the Insurance Commissioner from approving disability insurance policies that contain a discretionary clause.