Recently we’ve dealt a lot with how “discretionary authority” is sometimes used in insurance plans to allow the insurer to deny a claim that might otherwise appear valid and how this can impact your case if you need to go to court to get the benefits that you deserve.
The standard that the court uses to review your case depends on what state you live in and that standard can go a long way towards determining whether you’ll ultimately win or lose your case. Claimants in states following an “arbitrary and capricious” standard of review only win 28% of the time, while those in states using the “abuse of discretion” standard win far more often – in 68% of ERISA disability lawsuits.
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Partially due to this incredible discrepancy, all kinds of laws, statutes, and bans have popped up around the country to do away with discretionary authority altogether. In 2004, the National Association of Insurance Commissioners added another wrinkle by creating the NAIC Model Act, which includes language banning all discretionary clauses in health and disability insurance policies.
How Does the NAIC Model Act Work?
Technically, the NAIC Model Act doesn’t really do anything on its own. All it does is serve as an example of a ban that states can choose to take and use if they so choose. In short, even though the NAIC is a national organization, the Model Act itself is meant to be enacted on a state-by-state basis and won’t take effect until each individual state makes it a law.
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To date, at least 25 states have enacted some sort of restrictions or bans on discretionary authority, either using the NAIC Model Act or something of their own devising. In general, these say that insurance policies are no longer able to include discretionary clauses effective on the date that is laid out in the document in question.
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This would seem to be a boon to people who live in states where the standard of review for medical disability cases isn’t as favorable to claimants, but unfortunately that isn’t the end of the argument. Insurers have still found plenty of ways to fight against the NAIC Model Act and other bans. We’ll cover the arguments they use next time.
Want to learn more about long term disability policies? Read our free eBook. And if your claim has already been denied, don’t give up – call one of our knowledgeable long term disability lawyers.
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