The Texas Department of Insurance (“TDI”) has officially proposed regulations banning the use of discretionary clauses in insurance contracts. The regulations are the result of a petition filed by the Texas Office of Public Insurance Counsel (OPIC) on October 28, 2009 requesting the ban. Subsequent to the petition, the TDI held a public meeting and made an informal posting on its website.
Discretionary clauses allow insurers to interpret policy terms and evaluate an insured’s claim for benefits. According to the TDI’s official proposal, the ban “is necessary to protect insurance consumers from the possibility of incorrect and unfair coverage determinations by insurers without a subsequent opportunity for a full and independent review under a non-deferential standard.” The TDI is concerned that insurers may have a conflict of interest in coverage determinations that would have an adverse financial impact on the insurer, and therefore want to ensure that insureds have the opportunity to have coverage determinations reviewed by an independent third party.
The TDI is accepting written comments on the official proposal through July 5, 2010. The Texas Insurance Commissioner will consider the adoption of the ban at a public hearing on July 12, 2010.
For additional information, click here to view the TDI’s official proposal.
