DC Bulletin on Discretionary Authority

The District of Columbia Department of Insurance last week issued a formal Notice to insurers advising that policies containing discretionary clauses “will be examined to determine if any discretionary clauses can be used improperly to deny claims or to restrict any rights an insured has under the policy which is otherwise properly payable…”

The Notice cites the following language as an example of a discretionary clause:

“We have full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the policy.”

While there are no specific prohibitions on this sort of policy language in the DC insurance code or regulations, the Notice advises that the “Department does prohibit Sole Discretionary language and other types of discretionary clauses in policy forms, and will request changes to the policy form.”