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The National Consumer Disputes Redressal Commission (NCDRC) has ruled that an insurer cannot reject an insurance claim by citing non-disclosure of pre-existing medical conditions if the policy was issued after assessing the insured’s health status.
The commission emphasised that insurers have a duty to seek complete details about the insured’s medical condition and evaluate risks before issuing a policy.
What is the case?
The complainant, a senior citizen, had purchased an international medical health insurance policy from Care Health Insurance, paying a premium of ~17,864. While in Australia, the complainant experienced chest pain and underwent a stent procedure followed by further treatment, incurring hospital bills totalling 31,499 Australian Dollars.
The insurer rejected the complainant’s cashless benefits and subsequent reimbursement claim, citing non-disclosure of pre-existing conditions, specifically Coronary Artery Disease (CAD) and Dyslipidemia.
The District Commission had dismissed the complainant’s plea, prompting him to file an appeal in the State Commission.
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The State Commission allowed the appeal, directing the insurer to pay the entire claim amount with an interest rate of 9 per cent along with Rs 50,000 as compensation and Rs 25,000 as litigation costs.
Dissatisfied with the State Commission’s decision, the insurer filed a petition before the National Commission, seeking relief from the order to reimburse the complainant.
What did NCDRC say?
The NCDRC, presided by Inder Jit Singh, held that the insurer has a duty to seek complete details about the insured’s medical condition and assess risks before issuing the insurance policy. If the insurer issues the policy after the insured has disclosed existing medical conditions, even if some columns were left blank, the insurer cannot later repudiate the claim, citing non-disclosure.
The commission said that although the complainant failed to complete certain columns regarding diseases in the insurance proposal form, he did disclose having high blood pressure for the past five years. Despite this, the insurer issued the policy after receiving the premium.
The commission emphasised that the insurer could have requested the complainant to fill in any blank columns, especially considering he declared having a pre-existing disease. The insurer should have opted for a medical examination before issuing the policy, given the complainant’s age, history of blood pressure, and the nature of the overseas mediclaim policy.
The commission also referred to a 2021 Supreme Court judgement, which stated that insurers must assess the proposer’s medical condition and risks before issuing a policy. Once the policy is issued after such assessment, the insurer cannot reject a claim based on a disclosed pre-existing condition. If the insurer issues a policy despite blanks in the form, it cannot later claim suppression and deny the claim.
Talking to Business Standard, Shashank Agarwal, advocate at Delhi High Court said, “Quite often it is seen that the insurers/insurance companies reject the claims on the basis of ‘material disclosures’ on the part of the consumer stating that the consumer did not disclose the illness for which claim is now being made, when, in fact, the consumers did provide all the relevant information that was asked for.”
“With this judgement, the insurers will not be able to evade their liability towards the consumers. It is hoped that the insurers will become even more diligent before insuring a consumer and later on evading their liability. It must also be kept in mind that this judgement is still amenable to challenge before the Supreme Court,” he said.
