Discretionary Authority

What Does Discretionary Authority Mean?

Discretionary authority is the power to be the sole interpreter of claims. It is granted to insurance companies by a provision in an insurance contract.

Insuranceopedia Explains Discretionary Authority

Insurance applicants are cautioned to avoid policies with discretionary authority. By giving final say in awarding claims to the insurer, the policyholder might have their claim unfairly denied. It is difficult to convince a court of law to redress this if the company has a clause granting it discretionary authority.

Abuse of discretionary authority is very difficult to prove, which is why some states have outlawed it.