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DEPARTMENT OF LABOR AND ECONOMIC GROWTH OFFICE OF FINANCIAL AND INSURANCE SERVICES
CREDIT INSURANCE POLICY FORMS – DISCRETIONARY CLAUSES
Filed with the Secretary of State on
These rules become effective immediately upon filing with the Secretary of State unless adopted under sections 33, 44, or 45a(6) of 1969 PA 306. Rules adopted under these sections become effective 7 days after filing with the Secretary of State.
(By authority conferred on the commissioner of the Office of Financial and Insurance Services by section 22 of the credit insurance act, 1958 PA 173, 1969 PA 306, E.R.O. No 2000-2, and E.R.O. No
2003-1; MCL 550.622, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL 445.2011)
Draft June 7, 2006
R 550.301 and R 550.302 are added to the Michigan Administrative Code as follows: R 550.301 Definitions.
Rule 1. As used in these rules:
(a) “Appeal” means an appeal by a policyholder or other claimant of a claim denial by an insurer. It includes appeals to administrative agencies, arbitrators, courts, and mediators.
(b) “Commissioner” means the commissioner of the office of financial and insurance services.
(c) “Discretionary clause” is a provision in a form that purports to confer on the insurer discretionary authority to determine eligibility for benefits or to interpret the terms and provisions of a form including, but not limited to, a provision that does any of the following:
(i) Provides that a policyholder or other claimant may not appeal a denial of a claim.
(ii) Provides that the insurer’s decision to deny policy coverage is binding upon a policyholder or other claimant.
(iii) Provides that on appeal the insurer’s decision-making power as to policy coverage is binding.
(iv) Provides that the insurer’s interpretation of the terms of a form is binding upon a policyholder or other claimant.
(v) Provides that on appeal the insurer’s interpretation of the terms of a form is binding.
(vi) Provides that or gives rise to a standard of review on appeal that gives deference to the original claim decision.
(vii) Provides that or gives rise to a standard of review on appeal other than a de novo review.
(d) “Form” means a form identified in section 13 of the credit insurance act, 1958 PA 173, MCL 550.613.
(e) Terms defined in the credit insurance act, 1958 PA 173, as amended, MCL 550.601 to MCL 550.624, have the same meanings when used in these rules.
R 550.302 Discretionary clauses prohibited.
Rule 2. (a) A discretionary clause is unjust, unfair, inequitable, misleading, deceptive, and encourages misrepresentation of a policy within the meaning of section 13 of the credit insurance act.
(b) On and after the first day of the first month following the effective date of these rules, an insurer shall not issue, advertise, or deliver to any person in this state a policy, contract, rider, indorsement, certificate, or similar contract document that contains a discretionary clause. This does not apply to a contract document in use before that date, but does apply to any such document revised in any respect on or after that date.
(c) On and after the first day of the first month following the effective date of these rules, a discretionary clause issued or delivered to any person in this state in a policy, contract, rider, indorsement, certificate, or similar contract document is void and of no effect. This does not apply to contract documents in use before that date, but does apply to any such document revised in any respect on or after that date.
(d) Nothing in this rule limits the commissioner’s authority under sections 13 and 15 of the credit insurance act, 1958 PA 173, MCL 550.613 and MCL 550.615, to disapprove or withdraw approval of any form that contains a discretionary clause.
(e) By the first day of the second month following the effective date of these rules, each insurer transacting insurance in this state shall submit to the commissioner a list of all forms in effect in Michigan that contain discretionary clauses and shall submit a certification that the list is complete and accurate. If an insurer has no such forms in effect, it shall submit a letter to the commissioner reporting and certifying that fact.
