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R590.
Insurance, Administration. (Effective 3-21-03)
R590-218. Permitted Language for
Reservation of Discretion Clauses.
R590-218-1. Authority.
This rule is promulgated pursuant to Subsections
31A-2-201(1) and 31A-2-201(3)(a) in which the commissioner is empowered to
administer and enforce this title and to make rules to implement the provisions
of this title. Further authority to
regulate the use of reservation of discretion clauses in forms filed by insurers
with the department is found in Subsections 31A-21-201(3) and 31A-21-314(2).
R590-218-2.
Purpose.
This rule prohibits the use of reservation of
discretion clauses in forms that are not associated with ERISA employee benefit
plans. It creates a safe harbor for
insurance companies that provide insurance to ERISA employee benefit plans
sponsored by employers, allowing insurers to know what language in insurance
forms is acceptable to the department.
R590-218-3.
Applicability.
This rule applies to all forms filed with the
department, regardless of the insurance line or type of form.
R590-218-4.
Definitions.
For the purpose of this rule the commissioner
adopts the definitions set forth in Section 31A-1-301 and the following:
(1) “Employee benefit plan” means an employee
welfare benefit plan as defined in 29 U.S.C. 1002(1) or an employee pension
benefit plan as defined in 29 U.S.C. 1002(2) or a plan which is both an employee
welfare benefit plan and an employee pension benefit plan.
(2) “ERISA” means the Employee Retirement Income
Security Act of 1974.
(3) “ERISA employee benefit plan” means an employee
benefit plan subject to ERISA.
(4) “Form” is used as defined in Section 31A-1-301.
(5) “Reservation of discretion clause” means
language in a form that purports to reserve discretion to interpret the terms of
the contract, to determine eligibility for benefits under the plan, or to
establish a scope of judicial review or standards of interpretation, to the plan
administrator, the insurance company acting in the capacity of a plan
administrator in an employee benefit plan, or the insurance company acting as
the insurer.
R590-218-5.
Reservation of Discretion Clauses Prohibited ‑ Exception ‑
Safe Harbor Language.
(1) The commissioner finds reservation of
discretion clauses in forms to be in violation of Subsections 31A-21-201(3) and
31A-21-314(2). Accordingly, such
clauses are not permitted in a form unless provided otherwise by this rule.
Any reservation of discretion language previously accepted or approved by
the department is hereby prohibited. Any
use of reservation of discretion clause in a form required to be filed with the
department is a violation of Subsections 31A-21-201(3) and 31A-21-314(2) and is
prohibited, regardless of whether the form has been filed with or prohibited by
the department.
(2) Notwithstanding Subsection (1), a reservation
of discretion clause may be included in a form if the form is used only in ERISA
employee benefit plans and the reservation of discretion clause has language
that is the same as, or substantially similar to, the language in Subsection
(3).
(3) The following language may be used in a
reservation of discretion clause in forms filed for use in ERISA employee
benefit plans (Parenthesis indicate that the company filing the form may use a
name or pronouns as applicable):
"Benefits under this plan will be paid
only if (the plan administrator) decides in its discretion that (the claimant)
is entitled to them. (The plan administrator) also has discretion to determine
eligibility for benefits and to interpret the terms and conditions of the
benefit plan. Determinations made
by (the plan administrator) pursuant to this reservation of discretion do not
prohibit or prevent a claimant from seeking judicial review in federal court of
(the plan administrator’s) determinations.
The reservation of discretion made under this
provision only establishes the scope of review that a federal court will apply
when (a claimant) seeks judicial review of (the plan administrator’s)
determination of eligibility for benefits, the payment of benefits, or
interpretation of the terms and conditions applicable to the benefit plan.
(The plan administrator) is an insurance company that
provides insurance to this benefit plan and the federal court will determine the
level of discretion that it will accord (the plan administrator's)
determinations."
(4) A reservation of discretion clause in a form that
is used in an ERISA employee benefit plan must be highlighted in the form by use
of a bold font that is not less than 12 point type.
R590-218-6.
Filing Procedures.
Rather than filing multiple forms for ERISA
employee benefit plans and benefit plans not subject to ERISA, an insurer may
elect to file one form with the department that has the reservation of
discretion language included as a variable element, between brackets, with an
accompanying notation stating that the reservation of discretion language will
only be included in forms used for ERISA employee benefit plans.
R590-218-7.
Severability.
If any provision or clause of this rule or its
application to any person or situation is held invalid, such invalidity may not
affect any other provision or application of this rule which can be given effect
without the invalid provision or application, and to this end the provisions of
this rule are declared to be severable
KEY:
insurance, discretion clauses
2003
31A-2-201
31A-21-201
31A-21-314
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