The Texas Department of Insurance (“TDI”) has planned a public hearing for Wednesday, December 9, 2009, on whether the TDI should adopt a rule banning the use of discretionary clauses in insurance contracts. The hearing is the result of a petition filed by the Texas Office of Public Insurance Counsel (“OPIC”) requesting the ban.

Discretionary clauses allow insurers to interpret policy terms and evaluate an insured’s claim for benefits. OPIC believes these provisions are harmful to consumers because they “instruct reviewing courts to presume the insurer’s decision is correct making it nearly impossible to overturn” and “effectively nullify a carrier’s promise to pay benefits owed.” According to OPIC, twenty-two other states have adopted similar bans on discretionary clauses.

Click here to view the TDI’s official notice of hearing.