What is the discretionary clause in a disability insurance policy?

The discretionary clause is a contractual term in a disability insurance policy that provide insurers with sole discretion in deciding if, when, and what benefits are due under the insurance policy.

These clauses are only detrimental to a claimant if the policy is governed by ERISA. An example of a discretionary clause in a disability policy would state, “The administrator (insurance company) has sole discretionary and authority to determine eligibility for benefits or to interpret the terms or provisions of the policy or contract.”

The existence of a discretionary clause limits the way that a Court can review a disability claim denial and makes it extremely difficult for a court to conduct a fair review of a disability claim.

More than 12 different states have enacted laws that prohibit disability insurance companies from selling disability policies that contain a discretionary clause. The National Association of Insurance Commissioners model rules propose the abolishment of all discretionary clauses.

Please post your comment:

Please be advised that your comment will be public. Any information contained on our website is for informational purposes only and not legal advice. If you are seeking assistance with your claim, then please use our confidential Free Consultation form.

Your message:

Your name:

Your email:

Please note: The comments are moderated.
Your comment will need to be approved before it will appear on this page. Your name will appear with the comment, but your email address will not be posted. No off topic post will be accepted. Our attorneys may respond to your comment.

Send me an email each time there's a new comment on this page

Subscribe without commenting:

Please enter your email to be notified each time there's a new comment on this page:

Similar / Related:

• Can my disability insurance policy be exempt from ERISA?
• What are the differences between an individual disability insurance policy and an ERISA / Group disability policy?
• How do I know if my disability policy is subject to ERISA?
• What are self reported condition limitations in a group long term disability insurance policy?
• What should I be aware of if I am buying a disability insurance policy?

---

« Back to Frequently Asked Questions