Thanks to the efforts of numerous individuals Maryland House Bill 1085, became law this year and went into effect on October 1, 2011. I want to give special recognition to our State Insurance Commissioner, Therese Goldsmith, AARP, MAJ (Maryland Association for Justice), and progressive Delegates and Senators who sponsored this litigation, including my own Delegate, Heather Mizuer.
This Act, Section 12-211 of the Insurance Article of the Maryland Code, simply prohibits “discretionary clauses” in disability insurance policies issued or renewed after October 1, 2011.
Discretionary clauses reserve discretion to the Carrier to interpret the terms of the policy or provide standards of interpretation or review that are inconsistent with the laws of the State of Maryland.
This should be a significant help to disabled individuals, and their attorneys, in obtaining reasonable review by courts of denial of benefits. Particularly this has been a problem in group policies issued through employment and covered under ERISA. Those policies commonly contained “discretionary clauses” that made it difficult to overturn denials because the Courts essentially required in those instances that the employee/beneficiary prove the decision was arbitrary and capricious or not supported by substantial evidence in the record, a much higher standard than preponderance of the evidence which would otherwise be required under Maryland law.
In passing this law, Maryland joins other states that are acting to protect the rights of disabled workers, including Illinois and California. Andalman & Flynn applauds the adoption of this progressive Act by the State of Maryland.