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Federal judge upholds California law involving ERISA

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Over half of the states in the U.S. have enacted or are implementing laws that ban discretionary clauses in insurance contracts. Another federal judge has upheld the law in California. These laws are designed to raise the scrutiny level that insurers must undergo when they deny a claim for benefits.

The fact that the judge upheld the law can be considered a loss where the insured is concerned. It means that the insurer’s decision to deny benefits will now be subject to a level of scrutiny that is lower than in the past.

This latest case involved Blue Shield of California, who attempted “to paint California’s ban on discretionary clauses as ERISA-preempted.” The law in California has been before several federal judges and it continues to be upheld, even against Aetna Life Insurance Co., Principal Life Insurance Co., Metropolitan Life Insurance Co., and united of Omaha Life Insurance C.

Because of the latest ruling, Prudential Insurance Co. of America’s decision to deny a Blue Shield employee long-term disability benefits will now see “more rigorous judicial scrutiny.”

The judge had a couple more findings, including that the employee’s disability policy didn’t contain more than one interpretation of discretionary authority for Prudential. The language in the policy, “satisfactory proof of disability,” was not enough to give Prudential a grant of authority.

While the states continue to implement similar laws across the country, these federal rulings continue to find that the Employee Retirement Income Security Act isn’t affected by the law. More cases are under review over the same law.

If you believe that you have been unfairly denied disability benefits, an experienced insurance attorney can help. He or she can speak with you about your legal options in your case.

Source: Bloomberg BNA, “California Insurance Law Survives ERISA Preemption Challenge,” Jacklyn Wille, Oct. 06, 2016

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