Insurer can’t refuse mediclaim citing existing illness…, writes Ananda Debsharma

Dec. 29: The Supreme Court of India has held on 6 December, 2021 that an insurer cannot refuse a claim after the issue of the policy by referring to the existing medical condition stated by the insured in the proposal form. A bench of Justices DY Chandrachud and BV Nagarathna said that it is the duty of the proposer to disclose all material facts in the information to be given to the insurer.

It is assumed that the proposer knows all the facts and circumstances relating to the insurance offered. The Court held that though the proposer can disclose only what is known to him, the disclosure duty of the proposer is not limited to his actual knowledge, it also extends to those material facts which he should know in the ordinary course of business. This 57 pages observation was made while hearing an Appeal (Civil Appeal No. 8386/ 2015) by a person named Manmohan Nanda. This appeal was preferred against the order dated 22 May, 2015, passed by the National Consumer Disputes Redressal Commission in Consumer Complaint No. 92/2010 by which the complaint filed by Manmohan Nanda was dismissed.

The facts in a nutshell were that Manmohan Nanda, a resident of Mailviya Nagar, Bhopal had sought an overseas mediclaim Policy ­B  as he intended to travel to the  the United States of  America to attend the wedding of his sister-in-law’s daughter. Manmohan Nanda was medically examined at the instance of insurance company i.e. United India Assurance Company Ltd., Bhopal Division prior to the consideration of his request for issuance of a mediclaim policy. On his medical examination, the report categorically noted that he had diabetes type-II i.e. diabetes mellitus. No other adverse medical condition was found.

In the medical exam report, a specific query was sought as to whether any abnormalities were observed in the electrocardiogram test of the Manmohan Nanda. There was another query regarding any possible illness or disease for which he may require medical treatment in the ensuing trip to the USA. To both these queries, Dr. Jitendra Jain, the doctor who examined Manmohan Nanda had answered “normal” and “no” respectively. The representative of the respondent insurer on receipt of the medical reports assured to Mr. Nanda that on verification of the same the policy would be issued.

The insurer thereafter accepted the proposal form and issued the Overseas Mediclaim Business and Holiday Policy valid from 19 May, 2009 to 1 June, 2009, to Manmohan Nanda. Thereafter, he boarded a flight to San Francisco, USA on 19 May, 2009 at around 1:00 a.m. from Delhi airport and reached San Francisco on the same day at around 2:00 p.m. (local time). On exit from the the customs section at San Francisco airport, Mr. Manmohan Nanda felt weak and started sweating. His wife got him admitted at the SFO Medical Centre at San Francisco airport and after he received initial medical treatment, he was shifted to the Mills Peninsula Medical Centre where angioplasty was performed on 19 May, 2009 and 22 May and three stents were inserted to remove the blockage from the heart vessels.

In order to avail the benefit under the mediclaim policy, Manmohan Nanda’s son-in-law contacted M/s Corris International, a foreign collaborator of United India Insurance Company Ltd., which was to provide emergency assistance and claims administration services to the insured. M/s Corris International sought certain documents regarding details of treatment given by the Medical Centre as well as details of the mediclaim policy for the purpose of considering the same for indemnifying him and he was discharged on 24 May, 2009.

Two and a half months thereafter,  Mr. Manmohan Nanda started receiving bills from the cardio vascular wing of the Medical Centre and SFO Medical Centre towards the treatment he received at their facility. On 19 August, 2009, he sent a letter annexing all bills in original as well as the discharge summary to the Divisional Manager of United India Assurance Company Ltd. at their Bhopal office. On 22 August, 2009, he received a letter from Heritage Health TPA Pvt. Ltd, Mumbai stating that his claim had been repudiated as he had a history of hyperlipidaemia and diabetes and the policy did not cover re-existing conditions and complications arising there from.

The said repudiation was with regard to Bill raised by the Medical Centre for USD 2,29,719. Mr.Manmohan Nanda protested against the repudiation and requested his claim to be settled on a priority basis as the Medical Centre and the other centre in the USA where he had taken treatment had started pressing for release of payment. In this regard, a representation was sent on 16 November, 2009. However, by its letter dated 9 April, 2010, the United India Assurance Company Ltd., Bhopal Division reiterated its repudiation of the claim made by him.

Being aggrieved, Mr.Manmohan Nanda filed a complaint under Section 21(9) of the Consumer Protection Act, 1986 against the United India Assurance Company Ltd, being Consumer Complaint No.92/2010 before the Commission. On 22 May 2015, the National Consumer Disputes Redressal Commission, New Delhi has dismissed the said complaint which was filed by Manmohan Nanda and opined that the Insurance Company rightly repudiated the claim of the Manmohan Nanda as he had not disclosed true and complete picture about his health condition at the time of taking the policy and the exclusion clause under the policy was attracted in the case as Manmohan Nanda was taking medical treatment for a pre existing disease.

The Apex court of India has observed in para 69 of 57 pages Judgment dated 6 December, 2021 that the object of seeking a mediclaim policy is to seek Indemnification in respect of a sudden illness or sickness which is not expected or imminent and which may occur overseas. If the insured suffers a sudden sickness or ailment which is not expressly excluded under the policy, a duty is cast on the insurer to indemnify the insured for the expenses incurred there under. As such, the Apex court opined that the repudiation of the policy by the United India Assurance company was illegal and not in accordance with law.

Consequently, Manmohan Nanda is entitled to be indemnified under the policy. Hence, the National Consumer Redressal Commission was not right in dismissing the complaint filed by the Manmohan Nanda, a bench of Justices DY Chandrachud and BV Nagarathna said. The Bench also directed to Insurance Company that to indemnify the appellant (Manmohan Nanda) regarding the expenses incurred by him towards his medical treatment within a period of one month from the date of receipt of a copy of this judgment with interest at the rate of 6% per annum from the date of filing the claim petition before the Commission till realization and the expenses incurred by the appellant (Manmohan Nanda) was in terms of US Dollars and the claim would be paid in terms of Indian Rupees, the exchange rate as it existed on the date the claim petition was filed by him herein before the Commission or at Rs.45 INR, whichever is lesser, shall be reckoned for the purpose of determining the conversion rate of US Dollars into Indian Rupees. He is also entitled to rupees one lakh payable by the Insurance Company towards the cost of litigation.