A new California law helps level the playing field for consumers fighting disability claim denials with insurance companies.
Signed by Gov. Jerry Brown Oct. 3, the new law voids discretionary clauses in disability, health and life insurance that give insurers sole discretion to interpret the policies and decide if policyholders are entitled to benefits.
The use of discretionary clauses has become particularly troublesome for disability insurance policyholders.
"Discretionary clauses have been increasingly relied upon by insurers to reject legitimate claims for disability insurance when a consumer becomes disabled," California Insurance Commissioner Dave Jones said in a press statement. "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 the new law gives consumers an even chance to prove they are entitled to disability and other insurance benefits.
The law, authored by Senate Insurance Committee Chair Ron Calderon, D-Montebello, and sponsored by Jones, goes into effect Jan. 1, 2012.