Sen. Carpenter introduces bill to protect buyers of life and health insurance policies

AUGUSTA – On Tuesday, March 19, Sen. Mike Carpenter, D-Houlton, presented his bill LD 1089, “An Act To Ban Discretionary Clauses in Life and Health Insurance Policies,” to the Legislature’s Health Coverage, Insurance and Financial Services Committee at the State House. LD 1089 seeks to remove the discretionary clause that life and health insurance companies claim in their insurance policies, which allows insurance companies to have final discretion to interpret the terms of an insurance contract.

“The losers in this scenario are people who expected to have themselves or their loved ones covered by insurance only to learn that the insurance company they have been paying into for years unexpectedly refuses to help them,” said Sen. Carpenter. “With this bill, we can change that.”

Currently, life and health insurance companies have the authority to interpret the terms of a contract with the insured. In practice, this has meant that they have been able to arbitrarily decide who or what is covered under their insurance policy retroactively. By removing this clause, both insurers and insured will have the same information about what is and is not covered by insurance plans, whether for health or life insurance.

“Insurers right now have an unfair advantage. This bill does not give claimants more rights than insurance companies, it simply gives them the same rights,” said Attorney Gisele M. Nadeau, who specializes in life, health, and disability insurance issues and testified today.

The bill faces further action in the committee and votes before the Maine House and Senate.