SC: An insurer cannot repudiate a claim by citing an existing medical condition

Manmohan Nanda Vs. United India Assurance Co. Ltd.,
Court: Supreme Court of India.
Citation : 2021 Latest Caselaw 642 SC
Judgement Date: 06 Dec 2021 , Case No : C.A. No.-008386-008386 / 2015

BRIEF FACTS

1. The facts, in a nutshell, are that the appellant had sought an overseas mediclaim policy (hereinafter referred to as "medical policy") as he intended to travel to the United States of America ("USA") to attend the wedding of his sister-in-law's daughter. The appellant was medically examined at the instance of respondent No. 1 insurance company prior to the consideration of his request for issuance of a mediclaim policy. On his medical examination, the report categorically noted that the appellant had diabetes-type II (also known as diabetes mellitus). No other adverse medical condition was found.

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

3. The insurer thereafter accepted the proposal form and issued the Overseas Mediclaim Business and Holiday Policy bearing Policy Number 190100/46/09/ 44/70000008 valid from 19th May, 2009 to 1st June, 2009, to the appellant. Thereafter, the appellant boarded a flight to San Francisco, USA on 19th 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 exiting the customs section at San Francisco airport, appellant felt weak and started sweating.

5. 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 (hereinafter referred to as "Medical Centre" for the sake of brevity) where angioplasty was performed on the appellant on 19th May, 2009 and 22nd May and three stents were inserted to remove the blockage from the heart vessels.

4. In order to avail the benefit under the mediclaim policy, appellant's son-in-law contacted M/s Corris International, a foreign collaborator of respondent No. 1 and 2, 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 the appellant. The appellant was discharged on 24th May, 2009.

INSURANCE COMPANY's VIEW

On 22nd August, 2009, appellant received a letter from respondent No. 2 (the insurer) stating that his claim had been repudiated as the appellant had a history of hyperlipidaemia and diabetes and the policy did not cover per-existing conditions and complications arising therefrom. The said repudiation was with regard to Bill No.1 i.e. the bill raised by the Medical Centre for USD 2,29,719. The appellant 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 16th November, 2009. However, by its letter dated 9th April, 2010, respondent No.1 reiterated its repudiation of the claim made by the appellant.

APPEAL BEFORE NATIONAL CONSUMER DISPUTES REDRESSAL FORUM AND DECISION

Being aggrieved, the appellant filed a complaint under Section 21 (9) of the Consumer Protection Act, 1986 (hereinafter referred to as "Act" for brevity) against the respondents, being Consumer Complaint No.92/2010 before the Commission.

1. The Commission concluded that the complainant had a history of hyperlipidaemia and pepticulcer disease in addition to diabetes mellitus. Since this was disclosed by the complainant to medical authorities in the USA, the Commission found that there was no reason why he could not have disclosed the condition to the respondent insurance company at the time of obtaining the mediclaim policy.
2. That statins are lipid lowering agents which are found beneficial in primary and secondary prevention of cardiovascular complications in diabetics. Given that the complainant had admitted that he had been under statin medication, it was found that he had a preexisting disease of which disclosure had not been made.
3. The Commission held that it was the duty of the complainant to have ensured that complete facts about his health condition were brought to the knowledge of the insurance company at the time of obtaining the insurance policy. The complainant breached this duty of disclosure and acted in a manner contrary to the principle of 'uberima fides' between the insurer and the insured.
4. Having regard to general condition 10 of the policy, the Commission found that for any sickness for which insured had sought advice or had taken medical treatment even at the time of issuance of policy, the insured was not entitled to claim benefit under the policy owing to the "preexisting exclusion" under the policy.
5. The Commission held that concealment or nondisclosure of material facts regarding preexisting heart ailment was a valid ground for repudiation of the insurance claim by the respondent Insurer.
6. The Commission dismissed the appeal filed by appellant on the basis of above-mentioned points.

DECISION OF SUPREME COURT

The Apex Court observed that-

1. On the disclosures made by the appellant with regard to his existing disease, namely diabetes mellitus, the insurance company considered the same and issued the policy in question to the appellant. The respondent insurance company as a prudent insurer considered the details given by the appellant in the proposal form and issued the policy. The insurance company did not think that the medical and health condition of the appellant was such which did not warrant issuance of a mediclaim policy. The insurance company therefore did not decline the proposal of the assured as a prudent insurer.
2. Therefore, the respondents were not right in stating that as per the terms and conditions of the policy "all the complications arising out of preexisting condition is not payable." As already noted, acute myocardial infraction can occur in a person who has no history of diabetes mellitus. One of the risk factors for the aforesaid cardiac episode is diabetes mellitus. The fact that the appellant had diabetes mellitus was made known to the insurance company.
3. Therefore, it is observed that any complication which would arise from diabetes mellitus was also within the consideration of the insurer. Despite the aforesaid facts regarding the medical record of the insured, the insurance company decided to issue the policy to the appellant. The aforesaid clause has to be read against the respondent insurer by applying the contra proferentem rule against it. Otherwise, the very contract of insurance would become meaningless in the instant case. Hence, in our considered view, the respondent insurance company was not right in repudiating the policy in question.
4. 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 appellant for the expenses incurred thereunder.
5. Hence in the instant case, the repudiation of the policy by the respondent insurance company was illegal and not in accordance with law. Consequently, the appellant is entitled to be indemnified under the policy. In view of the aforesaid discussion, we hold that the Commission was not right in dismissing the complaint filed by the appellant herein.
6. The appeal is allowed in the following terms:

• The respondents are directed to indemnify the appellant 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 realisation.
• Since the expenses incurred by the appellant 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 the appellant 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 vide Meenakshi Saxena & Anr. Vs. ECGC Limited (formerly known as Export Credit Guarantee Corporation of India Limited) & Anr. - (2018) 7 SCC 479.
• The appellant is also entitled to Rs. 1,00,000/payable by the respondents towards the cost of litigation.

CONCLUSION

From above decision it is clear that "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,”. The Supreme Court said the repudiation of the policy by the United India Insurance company was illegal and not in accordance with law.

It said the object of buying a mediclaim policy is to seek indemnification in respect of a sudden illness or sickness that is not expected or imminent and that 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 appellant for the expenses incurred thereunder," the bench said.

DISCLAIMER: The case law produced here is only for knowledge and information of our readers. The views expressed here are the persona views of the author and should not be considered as professional advice. In case of necessity do consult with your insurance advisor for more clarity and understanding of insurance policy and relevant subject.