OAR 836-010-0026: Prohibition on the Use of Discretionary Clauses

(1)(a) As used in this rule, “discretionary clause” means a policy provision that purports to bind the claimant, or to grant deference to the insurer, in proceedings subsequent to the insurer’s decision, denial or interpretation of terms, coverage or eligibility for benefits. “Discretionary clause” includes a policy provision that provides any of the following: (A) An insured or other claimant may not appeal a denial of a claim; (B) The insurer's decision to deny coverage is binding upon a policyholder or other claimant or is otherwise entitled to deference upon appeal or review; (C) On appeal or review the insurer's decision-making power as to coverage is binding or otherwise entitled to deference; (D) The insurer's interpretation of the terms of a policy is binding upon a policyholder or other claimant or is otherwise entitled to deference; (E) On appeal the insurer's interpretation of the terms of a policy is binding or is otherwise entitled to deference; (F) A legal standard of review on appeal that gives deference to the original claim decision, or gives rise to such legal standard of review; or (G) The insurer has sole discretion to determine whether a claim is compensable or its interpretation of the provisions of the policy is entitled to deference in a subsequent proceeding. (b) Nothing in this section prohibits a carrier from including a provision in a contract that informs an insured that as part of its routine operations the carrier applies the terms of its contracts for making decisions, including making determination regarding eligibility, receipt of benefits and claims or explaining its policies, procedures and processes. (2) A policy, contract or agreement offered or issued in this state by an insurer to provide, deliver, arrange for, pay for or reimburse claim costs may not contain a discretionary clause or other language purporting to reserve discretion to the insurer to interpret the terms of the contract, or to provide standards of interpretation or review that are inconsistent with the laws of this state. (3) This rule does not prevent a policy provision that addresses alternative dispute resolution as allowed by law. (4) This rule is self-executing. The rule applies to policies, contracts and agreements issued or renewed on or after the date the rule is adopted. If a policy, contract or agreement is renewed and contains a provision rendered void and unenforceable by this rule, the parties to the policy, contract or agreement and the courts shall treat that provision as void and unenforceable.