Insurer Can’t Deny Claim by Citing Existing Medical Condition: SC
Moneylife Digital Team 29 December 2021
An insurer cannot reject a claim by citing an existing medical condition disclosed by the insured person in the proposal form, once the policy has been issued, the Supreme Court (SC) has said. The SC held that no insurance company can refuse a mediclaim citing that the policyholder only disclosed certain medical conditions while signing up.
The SC bench of justices DY Chandrachud and BV Nagarathna also said a proposer is under a duty to disclose to the insurer all material facts within his knowledge. The proposer is presumed to know all the facts and circumstances concerning the proposed insurance, it added.
The bench made the observations while hearing an appeal filed by one Manmohan Nanda, who had bought an overseas mediclaim business and holiday policy before travelling to the US.
After arriving at the San Francisco airport, Mr Nanda suffered a heart attack, was admitted to a hospital and underwent an angioplasty. Three stents were inserted to remove the blockage from his heart vessels. Subsequently, Mr Nanda claimed the treatment expenses from the United India Insurance company, which was repudiated by the latter stating that the appellant had a history of hyperlipidaemia and diabetes, which was not disclosed while buying the insurance policy. 
Earlier, Mr Nanda’s plea seeking treatment expenses from the insurer was rejected by the National Consumer Disputes Redressal Commission (NCDRC), saying he did not disclose that he had been taking statin drugs while buying the mediclaim policy.
The NCDRC said he failed to comply with his duty to make a complete disclosure of his health conditions. Mr Nanda filed an appeal against the NCDRC order in the SC.
At the hearing of the case, the SC observed that the rejection by United India Insurance Company for Mr Nanda’s claims for treatment expenses was illegal and not in accordance with the law.
The judges pointed out that the purpose of buying a mediclaim policy is to seek indemnification for illness or sickness that is not expected and may occur overseas.
While the proposer can only disclose what is known to him, his duty of disclosure is not confined to his actual knowledge. It also extends to those material facts that he ought to know in the ordinary course of business, the Court said.
“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 SC ruled.
The Court said the purpose of buying a mediclaim policy is to seek indemnification for illness or sickness that is not expected and 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 added.
The bench also stated that those signing up for mediclaim have to disclose to the insurer all material facts within his or her knowledge.
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