Disability Insurance Law Research

Texas Insurance Commissioner eliminates discretionary clauses in disability insurance policies

On December 6, 2010 the Texas Commission of Insurance adopted a new rule which prohibits discretionary clauses in disability insurance policies. This is a major victory for disability insurance claimants and hopefully a trend that will continue in every state. 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. 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. The Texas Insurance Commissioner stated, “the discretionary powers of insurance companies are unjust, encourage misrepresentation and are deceptive because they mislead consumers regarding the terms of coverage” in their policies.

The elimination of the discretionary clause will allow the courts to take a fresh look at any claim denial and make a determination without any deference to the disability insurance company. The elimination of the discretionary clause is not a cure of the ERISA restrictions, but it is certainly a major step in the right direction.

The new rules take effect on February 1, 2011 for some types of disability insurance, and June 1, 2011 for all other forms of health, life, and disability insurance policies issued in Texas. According to the Texas Office of Public Insurance Counsel twenty-three states and the National Association of Insurance Commissioners have now adopted statutes, rules, or policies prohibiting discretionary clauses.

There is one comment so far

Hello: I contacted my current employer’s private disability for the purpose of providing funds in case my current disabilities (for which I have an ongoing workers comp.case). I spoke with a rep where I shared that I had both the pre-existing injuries and an ongoing workers comp.case. He told me that The Hartford Ins. accepts clients like myself. Premiums were deducted from my salary. When my injuries got so bad, my M.D. wrote a letter stating that he ordered me to go on short -term disability. I provided this note to HR. Soon afterward, I was denied my benefits because of my ongoing workers comp. against my former employer. (1) I want a total refund of my premiums (2) I want the monies I promised. Because I did not receive such funds, I had a short-sale, and now a poor credit score. Much later, they send me a print-out regarding the denial. It states that one cannot collect if there’s an ongoing w/c case. However, it requires interpretation. This makes sense only if the ongoing w/c is with my current employer, not my former. Texas changed its disability law to allow those with my situation to collect if the w/c is with another employer, like mine.
Deborah Sheiman Feb 11, 2011 #1

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Brett C.

I have been on LTD, since Aug 2016, and Cigna is my LTD Insurance Company. I received a couple of payments from Cigna, without any issues, but then the payments stopped in Oct, at which time I was informed by Cigna that they were “looking into” my claim. Cigna stopped contacting me, would not even return calls or emails, but finally contacted me in mid-December to inform me that they would not be continuing with my claim.

I contacted Dell & Schaefer in January, at which time I began working with Attorney Alex Palamara, Disability Appeal Specialist Randa Escayg, and Legal Assistant Kathy Bordes. These folks were always kind, professional, understanding, did a great job of explaining everything to me, and most importantly I could tell that they truly cared about the situation my wife and I had unfortunately found ourselves in.

I fully understand the feeling of being overwhelmed, when you are first denied, that David vs Goliath feeling of you against some huge conglomerate, that powerless and helpless feeling that overcomes you when you are sick and injured and at your most vulnerable. The only things that you are able to focus on are saving your family’s home, doing whatever you can to take care of them, all while you should be focusing your energy on getting better, as much as you are able, so that you can recover your life to what it once was, returning your current life of overwhelming stress and chaos to some semblance of normalcy. Well, as soon as I began working with Alex, Randa, and Kathy, I immediately felt better, like I finally had someone in my corner fighting for me, somebody who cared, and somebody who would stand up to that giant corporation, and make things right.

Alex won my appeal for me, and Cigna is in the process of restoring my full benefits, retro back to October. I cannot describe to you the feeling of joy and elation the moment my wife and I were notified we had won. To those currently dealing with a LTD company, and all of the madness that entails, just know that there is a light at the end of the long dark tunnel. You do still have hope, and you can certainly do no better than to have the wonderful folks at Dell & Schaefer in your corner fighting for you!!!!

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