California Officials Welcome Disability Settlement

Several state and national insurance and employer groups filed a suit to block policy disapprovals in November 2005, in a state court in Sacramento, Calif.

The plaintiffs in the case are the American Council of Life Insurers, Washington; America’s Health Insurance Plans, Washington; the California Association of Life and Health Insurance Companies, Sacramento; the California Chamber of Commerce, Sacramento; and the National Association of Insurance and Financial Advisors-California, Sacramento.

Although California regulators have agreed to hold off on enforcing the provision banning discretionary clauses until litigation of the Hartford Life case is over, officials note that the trial court already has ruled issued a preliminary ruling coming down on the side of the California Department of Insurance.

Even before the Hartford Life case is resolved, California regulators will require group disability insurers to use one of several approved definitions of terms such as “pre-existing condition,” “total disability – own occupation” and “total disability – any occupation,” according to the settlement agreement.

California regulators said in October 2005 that they would prohibit disability insurers from adding benefit trigger requirements to policies. In the proposed settlement agreement, regulators agree not to withdraw approval of policies over that issue, but they say they plan to adopt regulations governing the use of additional benefit triggers.

California regulators also plan to enforce settlement terms that would regulate the way group disability insurers can offset a portion of disability benefits with income that claimants’ receive from other sources, such as disability benefits paid by an employer’s retirement plan.