Vermont § 4033 - Discretionary clauses prohibited

§ 4033. Discretionary clauses prohibited

• (a) The purpose of this section is to ensure that health insurance benefits, disability
  income protection coverage, and life insurance benefits are contractually guaranteed
  and to avoid the conflict of interest that may occur when the carrier responsible
  for providing benefits has discretionary authority to decide what benefits are due.
  Nothing in this section shall be construed to impose any requirement or duty on any
  person other than a health insurer or a health insurer offering disability income
  protection coverage or life insurance. (b) As used in this section: (1) “Disability income protection coverage” means a policy, contract, certificate, or
  agreement that provides for weekly, monthly, or other periodic payments for a specified
  period during the continuance of disability resulting from illness, injury, or a combination
  of illness and injury. (2) “Health insurer” has the same meaning as in section 4011 of this chapter and, as used
  in this section, also includes entities offering policies for specific disease, accident,
  injury, hospital indemnity, dental care, disability income, long-term care, and other
  limited benefit coverage. (3) “Life insurance” means a policy, contract, certificate, or agreement that provides
  life insurance as defined in subdivision 3301(a)(1) of this title. (c) No policy, contract, certificate, or agreement offered or issued in this State by
  a health insurer to provide, deliver, arrange for, pay for, or reimburse any of the
  costs of health care services may contain a provision purporting to reserve discretion
  to the health 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, and
  any such provision in a policy, contract, certificate, or agreement shall be null
  and void. (d) No policy, contract, certificate, or agreement offered or issued in this State providing
  for disability income protection coverage may contain a provision 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, and
  any such provision in a policy, contract, certificate, or agreement shall be null
  and void. (e) No policy, contract, certificate, or agreement of life insurance offered or issued
  in this State shall contain a provision 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, and any such provision in
  a policy, contract, certificate, or agreement shall be null and void. (Recodified and amended 2025, No. 11, § 2, eff. September 1, 2025.)