Quadrino Schwartz and Others Urge New York Insurance Commissioner to Act on Discretionary Clauses

Quadrino Schwartz urged the New York Insurance Commissioner to act as quickly as possible to proceed with a rulemaking process to implement a rule outlawing discretionary clauses in group health, life and disability policies.

A series of regional law firms were asked to join with Quadrino Schwartz in sending a letter to the Insurance Commissioner.  The response was impressive, and a formal letter signing ceremony was conducted at the New York City Offices of Quadrino Schwartz.

Discretionary clauses have been used by group insurers as a way of shielding insurance companies from  scrutiny by a federal judge if a lawsuit is filed challenging the decision to deny an insurance claim.  The clauses have come into play when the federal ERISA law is used as the guiding body of law for claims under group insurance policies.  Several States acted to ban the clauses, including New York, after the National Association of Insurance Commissioners urged such action.  New York pulled back from its original approach of issuing an informal Circulation Letter and decided to revoke the Letter and proceed instead with formal rulemaking, the process used to issue formal regulations.

Since the shift in approach by New York State, however, no action has been forthcoming.  "The impact of these disretionary clauses has been devastating to families throughout New York and the country", said Mr. Hack, the attorney at Quadrino Schwartz who led the effort to bring the regional law firms together to sign the letter.  The letter seeks to convince the New York Insurance Commissioner that with each passing month the number of victims of these clauses mounts and that this matter should be given priority within the Insurance Department.  "We hope to see prompt action so that this long and difficult period in the history of the law can be closed", said Mr. Hack.