Whether insurer can refuse claim of insured on ground that he was suffering from diabetes and hypertension?

The bone of contention, or the point of dispute is the precise meaning of “complications arising from pre-existing disease will be considered part of that pre-existing condition.”. This stipulation itself occurs in an exclusion clause. There is some authority that an exclusion clause, in the context of a contract of insurance, which is an assurance whose main purpose has to be given prominance, should be construed strictly (Ref. Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan & Ors., 1987 (2) SCC 654; B.V. Nagaraju v. Oriental Insurance Co. Ltd., 1996 (4) SCC 647). The primacy given to the main purpose, notwithstanding that contracting parties agreed to certain exclusions, is founded on the principle of interpretation that if contracting parties seek to achieve a certain purpose by entering into an agreement, the existence of exclusion clauses should be strictly interpreted and if it tends to defeat the main purpose, should be read down by the Court; if that is not possible, the court should altogether ignore it (Ref Halsbury, LC in Glynn v. Margeston & Co 1893 AC 351).

22. If the rule indicated in the preceding paragraph were kept in mind, it would be apparent that the object of the insurance policy is to cater to medical expenses incurred by the insured. That is the “main purpose” of the contract of insurance. The object of the exclusion clause is to except the liability of the insurer. In a sense this is at variance with the object of the policy. Nevertheless, it is a part of the contract; the court should firstly seek to harmonise the all the clauses, and attempt to give effect to it. If one proceeds on this premise, the concept of “pre-existing condition” has to be understood. Clause 4.1 defines it as any injury which existed prior to the effective date of the insurance; and any sickness or its symptoms which existed prior to the effective date of the insurance, whether or not the insured had knowledge that the symptoms were relating to the sickness. It is apparent that even if there were known diseases or conditions, which were disclosed and for which there was a likelihood of complications arising in the future, the insurer sought to distance itself from the liability. There is no dispute here that diabetes was a condition at the time of submission of proposal; so was hyper tension. In a sense these were “old ailments” the petitioner was advised to undergo ECG, which he did. The insurer accepted the proposal and issued the cover. One may ask, what then was the cover for. It is not an accident cover policy, or a life policy. Now, it is universally known that hypertension and diabetes can lead to a host of ailments, such as stroke, cardiac disease, renal failure, liver complications, etc, depending upon varied factors. That implies that there is probability of such ailments; equally they can arise in non-dibetics or those without hypertension. Unless the insurer spelt out with sufficient clairity, the purport of its clauses, or charged a higher premia, at the time of accepting the proposal, the insured would assume and perhaps, reasonably that later, unforseen ailments would be covered. Thus, it would be apparent that giving a textual effect to clause 4.1 would in most such cases render the mediclaim cover meaningless; the policy would be reduced to a contract with no content, in the event of the happening of the contingency. Therefore, I am of the opinion that clause 4.1 cannot be allowed to override the insurer's primary liability; the “main 


purpose” rule would have to be pressed into service. This finding is reinforced in this case, as the insurer renewed the policy, in 2006, after the petitioner underwent the CABG procedure.

23. In view of the above discussion, the refusal by the insurer to process and reimburse the petitioner's claim is arbitrary and unreasonable; as a state agency, it has to set standards of model behaviour; its attitude here has displayed a contrary tendency. A direction is issued to the respondent to process the petitioner's claim, and ensure that he is reimbursed for the procedure undergone by him according to the claim lodged with it, within six weeks.

HIGH COURT OF DELHI

W.P.(C) 656/2007

Hari Om Agarwal Vs Oriental Insurance Co. Ltd 

S. Ravindra Bhat, J.

Decided on 17.09.2007

Citation: 2007 SCC OnLine Del 1278 : (2007) 98 DRJ 246 : AIR 2008 Del 29

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Whether insurance company can refuse to renew policy only because insured has contracted disease during period of policy?

Respondents though were not entitled to automatic renewal, but indisputably, they were entitled to be treated fairly. We have noticed hereinbefore some of the clauses contained in the prospectus as also the insurance policy. When a policy is cancelled, the conditions precedents therefor must be fulfilled. Some reasons therefor must be assigned. When an exclusion clause is resorted to, the terms thereof must be given effect to. What was necessary is a pre-existing disease when the cover was inspected for the first time. Only because the insured had started suffering from a disease, the same would not mean that the said disease shall be excluded. If the insured had made some claim in each year, the insurance company should not refuse to renew insurance policies only for that reason. The words `incepts for the first time' as contained in clause 4.1 as also the words `continuous and without break' if the renewal premium is paid in time, must be kept in mind as also the reasons for cancellation as contained in clause 7(1)(n) thereof.

65. Renewal of a medi-claim policy subject to just exceptions should ordinarily be made. But the same does not mean that the renewal is automatic. Keeping in view the terms and conditions of the prospectus and the insurance policy, the parties are not required to go into all the formalities. The very fact that the policy contemplates terms for renewal, subject of course to payment of requisite premium, the same cannot be placed at par with a case of first contract.

Reportable

Supreme Court of India

United India Insurance Co. Ltd vs Manubhai Dharmasinhbhai Gajera & ... on 16 May, 2008

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When insurance company can not avoid payment of Mediclaim?

The contention raised by the learned counsel
for the Insurance Company cannot stretched any
further in view of the clear cut finding by the
Apex Court in a decision in the case of United
India Insurance Company Limited v. Manubhai
Dharmasinhbhai Gajera and others, reported in
(2008) 10 SCC 404, wherein, it has been held that
“as per the terms of the prospectus and the
insurance policy in the present case what was
necessary for non-renewal was a pre-existing

disease when the cover was incepted for the first
time. Hence, only because the insured had
contracted or come to suffer a disease during the
currency of the insurance policy, the same would
not mean that the said disease shall be excluded
or that renewal could be denied on that ground.”
It has been further held that “if the insured had
made some claim in each year, the insurance
company should not refuse to renew insurance
policies only for that reason. In the same
judgment, it has been held that “Insurance
companies cannot either in their prospectus or in
the terms of the policy lay down any condition
which would be derogatory to the terms and
conditions approved by IRDA.”
12. This case can be viewed from other angle. The
disease acquired by the wife of the petitioner
was during the pendency of the Insurance Policy.
The respondents-Insurance Company renewed the
policy with loaded premium and with an assurance
that if the petitioner pays this loaded premium,
the exclusion clause will not be there in the
renewed policy. However, the respondents seem to
have backed out from their promise, as they
charged the loaded premium and kept the exclusion
clause in the renewal policy despite the fact
that the disease was acquired during the pendency
of the policy. We are living in a welfare State.
All these rules and policies are meant for the
welfare of the human beings. The authorities are

not expected to stick to technicalities and adopt
a wooden attitude while dealing with the human
beings. Once the respondent-Insurance Company has
insured a person for mediclaim, they cannot be
allowed to shift the burden on the insurer and
refuse the mediclaim at the time when person
suffers from a disease.
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 4550 of 2006

NM BIJLANI, IAS (RETD)
V
NEW INDIA ASSURANCE CO LTD & 2..
CORAM: MR.JUSTICE MOHINDER PAL
Date : 01/02/2017
Citation: AIR 2017 Guj 57

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Whether mediclaim can be rejected on the ground that pre-existing disease not known to insured was not disclosed?

Dr. Kundnani seems to have changed his mind subsequently and given certificate on 04/01/2010 stating that the insured had been suffering from this problem not since last three years but for the past three months. Let us assume that this letter was issued with an intention to help the insured and that the insured was suffering from this problem for the past three years. Still, we fail to understand as to how mere complaints of persistent non-resolving pain in left leg could make a layman like the Complainant image that he was suffering from some disorder of nervous system, which he should have disclosed in the proposal form. Contention of the Learned Counsel for the Insurance Company, that such a pain observed when the insured was examined at the Bombay Hospital should be sufficient to attribute to the insured the knowledge that he was suffering from the ailment/disease when he submitted the proposal more than two years prior to the examination by the doctor, cannot at all be accepted. Hindsight is good but, hindsight cannot lead to taking the person back in the scale of time. What the patient came to know in the year 2009 could not have been imagined by him in the year 2008 when he filled-up the proposal form. Therefore, inference that insured knew of his disease and he had suppressed it or did not disclose it was thoroughly unwarranted. We may point out that the Insurance Ombudsman to whom the matter was taken up has merely observed that the ailment was possibly pre-existing. He had not come to the conclusion that the ailment was decidedly pre-existing. For repudiating a claim Insurance Company must show that the ailment was pre-existing to the knowledge of the insured and the insured suppressed material information.

State Consumer Disputes Redressal Commission

Mr. Ashok M. Ahuja vs United India Insurance Co. Ltd. ... on 10 December, 2013
Citation;2015(3) ALLMR(Journal)50

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