Insurer can’t deny claim citing existing illness – SC on health policies

The Supreme Court has held that no insurance company can deny a mediclaim based on a medical condition disclosed by the policyholder during the policy’s enrollment process.

Additionally, a bench of Justices D Y Chandrachud and B V Nagarathna stated that the policyholder is required to report to the insurer any significant facts within his or her knowledge, noting that the buyer is believed to be aware of all relevant facts and circumstances pertaining to the insurance.

While policyholders are only need to tell what they know, their responsibility extends to those material information that they should know in the ordinary course of business, the apex court stated.

“Once the policy has been issued after assessing the medical condition of the insured, the insurer cannot repudiate the claim by citing an existing medical condition, which was disclosed by the insured in the proposal form and which condition has led to a particular risk in respect of which the claim has been made by the insured,” said the bench in a recent judgment.

The judgement was rendered in an appeal filed by one Manmohan Nanda against an order of the National Consumer Disputes Redressal Commission (NCDRC) dismissing his plea for reimbursement of medical expenditures incurred in the United States.

Nanda had purchased an international medical, business, and vacation policy from the United India Insurance Company in preparation for his trip to the United States.

He experienced a heart attack upon arrival at the San Francisco airport and was sent to the hospital.

He was then treated with an angioplasty and three stents to clear the obstruction from his cardiac veins.

In his petition, he stated that his insurer rejected his claims for treatment fees on the grounds that the appellant had a history of hyperlipidemia (high cholesterol) and diabetes, which were not revealed when he purchased the insurance policy.

The NCDRC determined that because the complainant was using statin medicine, which was not revealed when he purchased the mediclaim policy, he violated his obligation to properly disclose his health problems.

The SC, however, stated that United India Insurance Company’s denial of the claim was not in compliance with the law.

It stated that the purpose of purchasing a mediclaim coverage is to seek indemnity in the event of an unexpected disease or sickness that occurs while travelling.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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