Discretionary Authority

What Does Discretionary Authority Mean?

Discretionary authority is the power to serve as the sole interpreter of claims, granted to insurance companies through a provision in an insurance contract.

Insuranceopedia Explains Discretionary Authority

Insurance applicants are advised to avoid policies that include discretionary authority. Policyholders risk having their claims unfairly denied by granting the insurer final authority in deciding claims. It can be challenging to convince a court to intervene if the insurance company has a clause granting it discretionary authority.

Proving abuse of discretionary authority is also difficult, which has led some states to ban this practice.