Montana Claims Rule Stands As Supreme Court Declines to Review

A Montana insurance rule that makes it more difficult for companies to deny claims will stand, after the U.S. Supreme Court declined to hear the case.

“It is immensely important and affects the health insurance rights of tens of millions of Americans,” said former Montana state auditor and insurance commissioner John Morrison. “Health insurance is only useful if your claims are paid.”

In 2003, Morrison decided to prohibit a clause in group health and disability insurance policies that give companies discretion over whether they pay claims.

Standard Insurance Co. of Portland, Ore., filed a lawsuit in September 2006 challenging the prohibition, arguing that Morrison’s action was pre-empted by federal law and exceeded his authority.

U.S. District Judge Donald Molloy of Missoula ruled in February 2008 that Morrison’s decision was allowed as “straightforward regulation of insurance” that federal law “expressly saves from pre-emption.”

Morrison has said discretionary clauses give insurance companies “wide berth in denying claims.”

Removing the clauses means consumers will not have to prove that the insurance company abused its discretion in denying a claim. Instead, claims will be paid when the balance of evidence supports payment, Morrison has said.

Standard Insurance appealed to the 9th U.S. Circuit Court of Appeals, which upheld Molloy’s ruling. Last Monday, the U.S. Supreme Court declined to hear the case.

Bob Speltz, a spokesman for Standard, said Thursday that the company is disappointed with the Supreme Court’s decision. However, he said the high court “may feel further development in the lower courts is appropriate before it directly addresses the issue.”