Garamendi commented on the new protections, “Last year I developed tougher standards for disability policies sold in California. I vowed to require all disability insurers to observe those standards. Today’s announcement fulfills that promise and provides significantly more protection for consumers from arbitrary and harmful practices within the industry.”
The following are a few important standards established in this agreement:
- Disability insurance policies may not contain a “discretionary clause” that allows the insurer to determine whether a policyholder who makes a claim is entitled to benefits. They must abide by an upcoming San Francisco Superior Court ruling on the issue in “Hartford v. Garamendi." The court has previously issued a proposed decision in the Department’s favor, holding that it can require insurers to drop the discretionary clause.
- Policies must contain a definition of “disability” that is consistent with California’s established definition. Basically, if a person cannot perform with reasonable continuity all of the substantial and material acts required by his/her occupation, then that person is totally disabled from performing that occupation.
- The definition of what constitutes a pre-existing condition has been substantially narrowed and clarified. A claimant must now have received treatment for a diagnosed condition in order for it to qualify as a pre-existing condition.
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