Minnesota recently joined over 25 other states in taking action to put those claiming disability benefits on a more level playing field. The new law, which became effective January 1, 2016, prohibits disability benefit policies from containing language that will give insurers deference in their decision making. Minnesota had enacted a law in the late 1990s to similarly protect healthcare claims but excluded disability benefit claims. Now, both healthcare and disability benefit plans are prohibited from containing discretionary clause language that confers sole discretionary authority to the insurer to determine eligibility for benefits or to interpret the terms of the policy.
Without this legislation, an insurer’s decision-making was protected, and it was very difficult for an insured person to challenge a wrongful denial or termination of benefits. Discretionary clauses prevent the courts from reviewing an insurer’s decision “de novo” or by a preponderance of the evidence, as most cases are reviewed. Instead, a long-term disability policy that contains such discretionary clauses heightens the burden of proof for the plaintiff and makes it very difficult for a plaintiff to succeed even with very good supportive evidence. A “de novo” standard of review ensures that cases are reviewed by the courts to determine whether a decision is wrong without affording any deference to the insurance company’s decision. The result of the legislation will likely mean that more claimants will receive benefits and that insurers will less likely deny or terminate a claim that is supported by the medical evidence.
The new legislation applies to policies issued or renewed on or after January 1, 2016.