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COLORADO JOINS GROWING LIST OF STATES THAT OUTLAW DISCRETIONARY CLAUSES

Colorada recently passed a law banning the use of discretionary clauses in any Long Term Disability insurance policy. This ban also applies to group policies. Colorado’s new law reflects the same policy decision of the Michigan Insurance Commissioner.

Banning these discretionary clauses, and requiring that a court review the claim on a “de novo” basis means that the court must perform its own review and decide whether the administrator’s decision was right or wrong, with absolutely no deference given. This will, in all likelihood, have a huge effect on the number of viable Long Term Disability claims in Colorado.

Thanks to Attorney Shawn McDermott for his blog on this subject.