In a recent ruling, the Supreme Court said that if a person holds a valid insurance policy, the insurance company is obligated to reimburse the expenses incurred.
The court also emphasised that once the insurance company acknowledges that the non-disclosure of a specific disease during the policy purchase was immaterial to the cause of death, it cannot deny subsequent claims or refuse to renew the policy based on the same grounds.
This decision reinforces the principle that insurers must honour valid policies and cannot unfairly withhold benefits of coverage.
The Case
In 2008, the insurance company had rejected the claims for the treatment of the appellant’s wife. Dissatisfied with this decision, the appellant approached the district forum to challenge the repudiation of claims. The district forum ruled in favour of the appellant, stating that there was no connection between the disease alleged to have been concealed and the disease for which treatment was sought.
The district forum further directed the insurance company to renew the policies from their expiration date upon payment of the required renewal charges. This decision by the district forum set aside the insurance company’s repudiation of the claims and provided relief to the appellant.
Dissatisfied with the district forum’s order, the insurance company appealed to the State Commission. However, the State Commission upheld the district forum’s decision and dismissed the appeal. The insurance company then further challenged the State Commission’s order by appealing to the National Commission. The insurance company specifically contested the direction for the renewal of the insurance policy starting from 07.07.2009.
It is important to note that the amount spent by the appellant on the treatment was not disputed and was duly reimbursed by the insurance company. But the case has been dragging on since then.
The Ruling
A division bench comprising Justice Abhay S Oka and Justice Rajesh Bindal recently considered an appeal from the husband whose wife had passed away from ovarian cancer. The husband raised concerns that the insurance company did not reimburse the expenses he incurred for his wife’s treatment and had also refused to renew the insurance policy.
The insurance company justified its actions by stating that the husband had not disclosed his wife’s rheumatic heart disease when initially purchasing the policy, even though the cause of her death was ovarian cancer.
The Supreme Court overturned the order of the National Commission, which had been challenged by the husband, and reinstated the orders of the District Forum and State Forum, which directed the insurance company to renew the policies. The Supreme Court noted that the rejection of the claim had already been set aside by the lower forums and had been accepted by the insurance company.
What It Means
According to Anant Singh Ubeja, senior associate, SKV Law Offices, the law laid down by the Hon’ble Supreme Court of India, in the instant case is as follows:-
(a) No claim can be refuted by the insurance company if an individual holds a valid insurance policy.
(b) The insurance company cannot state that concealment of an unrelated/pre-existing disease is non-material and on the other hand use the same to dismiss the claim of an individual.
(c) Moreover, the same cannot even be a ground to deny renewal of an insurance policy.
Therefore, to sum up the Supreme Court judgment, it is now settled that when an insurance company accepts concealment of unrelated disease is not material/ important, the further claims and renewal cannot be refused on the same ground.
“In the facts of the present case, the Hon’ble Supreme Court of India has put to rest the long-routed litigation between an individual and the insurance Company,” says Ubeja.
Says Abhishek A Rastogi, founder of Rastogi Chambers, “This decision will certainly boost the confidence of the consumers who always have the apprehension that the insurance claims would be subject to litigation and diverse hassles. It must be noted that when these decisions are tilted towards the consumer, the entire industry tends to gain as there will be more demand for such policies.”
