A contract of insurance requires both the parties to maintain utmost good faith. Once a policy is issued, the terms and conditions cannot be varied, unless such variation is expressly consented to by the insured. If the terms are unilaterally changed, would the claim have to be settled in accordance with the original terms of the policy or would it be on the basis of the revised terms? In a recent ruling, the South Mumbai Consumer Forum, presided over by S M Ratnakar and S G Chabukswar, has held that unilaterally changed terms could be disputed by the insured and the claim would have to be settled on the basis of the original policy conditions.
Soli Ardeshir Modi, who is over 80 years old, had a Mediclaim policy issued by New India Assurance. The policy had been in existence for several years and was renewed without break. He was insured for Rs 1 lakh and had accumulated a cumulative bonus of Rs 50,000, taking the total coverage to Rs 1.5 lakh. In March 2012 he was operated for inguinal hernia at Breach Candy Hospital, for which the total expenses came to Rs 1,83,219. He lodged a claim through M D India Healthcare Service (TPA). Though the available coverage was Rs 1.5 lakh, the insurance company sanctioned only Rs 62,814, stating the claim was computed according to the revised policy conditions.
Ratnakar, president of the Forum, in an order dated August 28, 2014, noted that the original policy was called "Mediclaim Insurance Policy (01/09/1996)" and the renewed policy was termed "Mediclaim Policy (2007)". It contained revised terms and conditions which had been incorporated without Modi's consent. Under the revised policy, sub-limits were imposed for room charges and other medical expenses, which did not exist earlier.
The Forum noted that the judgement of the Supreme Court in the case of Biman Krishna Bose v/s United India Insurance Co Ltd [(III) 2001 CPJ 10 (SC)], where it had been laid down that a renewal of a policy merely extends the policy period on identical terms and conditions as embodied in the original one. The Forum accordingly held that a revision in the policy conditions was not permissible and directed the insurance company to renew it on the same terms and conditions incorporated in the original policy. The Forum also directed the insurance company to pay the remaining amount of Rs 87,186, along with nine per cent interest from May 11, 2012 till payment. Additionally, compensation of Rs 8,000 and costs of Rs 3,000 were awarded to Modi.
Insurance companies mislead consumers, saying a mediclaim policy is a year to year contract, so the terms can be varied at the time of each renewal; you either take it or leave it. This is not legally permissible. A consumer has the right to insist the renewal be on the original terms and conditions and nothing detrimental to his interest can be unilaterally incorporated by the company.
The author is a consumer activist
