SC: An Insurer cannot refuse a claim by citing existing medical condition as reason

Fact and Issue of the case

The facts in a nutshell are that the appellant had sought an overseas mediclaim policy- B (hereinafter referred to as “Mediclaim  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 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. 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.

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. 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. 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 24^th May, 2009. Two and a half months thereafter, appellant started receiving bills from the cardiovascular wing of the Medical Centre and SFO Medical Centre towards the treatment he received at their facility. On 19^th August, 2009, the appellant sent a letter annexing all bills in original as well as the discharge summary to the Divisional Manager of respondent No. 1 at their Bhopal office. The same letter was also sent to respondent No. 2.

On 22nd August, 2009, appellant received a letter from respondent No. 2 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. 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. A reply was filed to the complaint by respondent No.1 stating that appellant’s claim was rightly rejected by respondent No.2 on the ground of non-disclosure of a pre-existing disease as the treatment report of the appellant showed prior medication such as statins, which is a lipid  lowering  medicine.  The said reply was filed on 3rd March, 2011. Respondent No.2 also filed its reply on 27th April, 2011. Appellant filed his rejoinder to the replies of the respondents in August, 2011. Appellant also filed an additional affidavit enclosing medical opinions of three doctors on affidavit stating that prescription of statins to a person having diabetes-type II is by way of precaution and not because the patient would be suffering from any cardiovascular disease. Respondent No. 1 and 2 filed  their evidence by way of affidavit and thereafter written submissions were filed by both sides. Subsequently, the Commission dismissed the complaint filed by the appellant on the ground of non-disclosure of material facts. Hence this appeal by the claimant.

Observation of the court

Viewed in the aforesaid perspective, it is held that the respondent insurance company could not have repudiated the policy on the ground that acute myocardial infraction suffered by the appellant on landing at San Francisco, USA was a “pre-existing and related complication” which was excluded under the policy.  The insurer was informed about the pre-existing condition of  the appellant, namely, diabetes mallitus-II and it was for insurer to gauge a related complication under the policy as a prudent insurer and then issue the policy when satisfied. In the absence of the same, the treatment availed by the appellant for acute myocardial infraction in USA could not have been termed as a direct offshoot of hyperlipidaemia and diabetes mellitus so as to be labelled as a pre- existing disease or illness which the appellant suffered from and had not disclosed the same. At any rate, the appellant had in the proposal form disclosed that he was suffering from diabetes mellitus-II and for which the medical test reports were submitted along with the proposal form which were considered by the insurance company before the policy was issued to the appellant. In fact, the appellant stated in his representation dated 16th November, 2009, against the repudiation of the policy that he was taking lipid-lowering medicines not because he was suffering from hyperlipidaemia but as it was customary to take such medication for prevention of cardio-vascular complications in diabetics. He also stated that he had informed the physician, Dr. Jitendra Jain, who examined him prior to obtaining the policy, of the medicines he had been taking. Therefore, the insurance company was well aware of the fact that the insured was a diabetic and was taking all necessary medication for preventing further complications and controlling the disease. Hence in our view, there was no suppression of any material fact by the appellant to the insurer.

Further on the disclosures made by the appellant with regard to his existing disease, namely diabetes mellitus-II, 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. Therefore, the respondents were not right in stating that as per the terms and conditions of the policy “all the complications arising out of pre-existing condition is not payable.” As already noted, acute myocardial infraction can occur in a person who has no history of diabetes mellitus-II. One of the risk factors for the aforesaid cardiac episode is diabetes mellitus-II. The fact that the  appellant  had diabetes mellitus-II was made known to the insurance company. Therefore, it is observed that any complication which would arise from diabetes mellitus-II 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.

Conclusion

The appeal is allowed in favour of petitioner i.e. Manmohan Nanda with 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 i.e. Manmohan Nanda is also entitled to Rs. 1,00,000/- payable by the Insurance Company towards the cost of litigation.

Read the full order from below

SC-An-Insurer-cannot-refuse-a-claim-by-citing-existing-medical-condition-as-reason

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