Today Governor Schwarzenegger vetoed AB 1868 that would have banned discretionary clauses in group insurance policies. This is a disappointment to consumer groups but not to insurers who rely on them. Currently, the Department of Insurance bans them in group policies anyway. Here are the Governor’s comments on why it was vetoed:
To the Members of the California State Assembly:
I am returning Assembly Bill 1868 without my signature.
This bill would prohibit the Insurance Commissioner from approving any disability or
life insurance policy if it includes a provision that would reserve discretionary authority
to the insurer to determine eligibility for benefits, and voids certain provisions of a policy
or agreement if it provides or funds life insurance or disability insurance coverage.
This bill is unnecessary, as the Insurance Commissioner already has the authority to
prohibit the use of discretionary clauses.
For this reason I cannot sign this bill.