Insurer Cannot Reject Your Claim Citing Pre-Existing Medical Condition

January 4, 2022 Mutual Fund

Do you remember the famous case of Mr Manmohan Nanda and United India Insurance Co. Ltd. that has been in the news for more than a decade? The Supreme Court was hearing an appeal filed by Mr Manmohan Nanda against an order of the National Consumer Disputes Redressal Commission (NCDRC) for rejecting his plea seeking a claim for medical treatment expenses incurred in the USA in 2009.

Once the health insurance policy is issued to the insured after assessing his/her medical condition, no insurer can repudiate a claim by citing a pre-existing medical condition that was disclosed by the insured in the proposal form, the Supreme Court has said.

The facts in a nutshell are as follows:

Mr Nanda had bought an Overseas Mediclaim Business and Holiday Policy as he was planning to travel to the US on 19th May 2009 to attend a family function.

Before issuing the policy to Mr Nanda, the insurance company had performed a medical examination which revealed that he had diabetes type II (i.e. diabetes mellitus) and no other adverse medical condition was found.

In the medical exam report, a special query was sought as to whether any abnormalities were observed in Mr Nanda’s electrocardiogram test. To which, Dr Jain (the doctor who examined Mr Nanda) had answered ‘normal’. There was another query regarding any possible disease/illness for which the proposer (Mr Nanda) may require medical treatment in the ensuing trip to the USA, to which Dr Jain had answered ‘No’.

Upon receipt of the medical reports, the representative of the insurance company assured Mr Nanda that the policy will be issued upon verification of the medical reports.

The insurer thereafter accepted the proposal form and issued the Overseas Mediclaim Business and Holiday Policy to Mr Nanda, which was valid from 19th May 2009 to 1st June 2009.

Unfortunately, on reaching San Francisco, Mr Nanda had suffered a heart attack and was admitted to a hospital where angioplasty was performed on him, and three stents were inserted to remove the blockage from the heart vessels.

Subsequently, Mr Nanda claimed for the medical expenses from the United India Insurance Co. Ltd. However, the claim was repudiated by the insurance company stating that the insured had a history of hyperlipidaemia and diabetes which was not disclosed at the time of buying the insurance policy.

Upon filing a complaint regarding this, the National Consumer Disputes Redressal Commission (NCDRC) had said that Mr Nanda had failed to comply with his duty to make a complete disclosure of his health conditions. Mr Nanda agreed that he was under statin medication and it was found that he had a pre-existing disease of which disclosure was not made to the insurance company while buying the insurance policy. Hence, the NCDRC said that the insured was not entitled to claim benefit under the policy owing to the ‘pre-existing exclusion’ under the policy. The NCDRC held that concealment or non-disclosure of material facts regarding pre-existing heart ailment was a valid ground for repudiation of the insurance claim by the United India Insurance Co. Ltd.

Hence, Mr Nanda filed an appeal against the order in the Supreme Court. At the hearing of the case, the Supreme Court said the United India Insurance Co. Ltd. repudiating Mr Nanda’s claim for medical treatment expenses was illegal and not in accordance with the law.

Mr Nanda admitted that he was unaware that he was suffering from hyperlipidaemia until 19th May 2009 in San Francisco. Moreover, the questions in the insurance proposal form were vague, which he had left blank. Moreover, the insured was under statin medication for diabetes type II, which was disclosed by the insured in the proposal form. The insurer being appraised about the said medical condition of the insured, issued the mediclaim policy. Hence, it was clear that the insurer did not consider the said medical condition of Mr Nanda as a risk factor for any possible cardiac ailment during the term of the policy so as to decline acceptance of the proposal form and issuance of the mediclaim policy.

Furthermore, one of the panel doctors of the insurer had checked the insured’s ECG report and the policy was issued to Mr Nanda only upon finding no issues in the ECG report. Therefore, the court said that the insurer was 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’.

The judge 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 court also said that the purpose of buying a mediclaim policy is to seek indemnification for illness or sickness that may occur unexpectedly and/or 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 court added.

The insurer failed to prove that the heart attack was caused by hyperlipidaemia and diabetes mellitus, hyperlipidaemia was a pre-existing condition, and the insured knowingly suppressed the fact at the time of filling up the proposal form.

The court also stated that those signing up for the mediclaim (proposers) are under a duty to disclose all material facts within their knowledge to the insurer. The proposers are presumed to know all the facts and circumstances concerning the proposed insurance, it added.

The bench also said, “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 which, in the ordinary course of business, he ought to know.”

To Conclude:

The insurer cannot reject your claim by citing the pre-existing medical condition if the insured declares it at the time of buying the mediclaim policy or if one is found in the medical examination before issuing the policy. Therefore, for a successful claim settlement, it is advisable to disclose all the medical facts known to you at the time of purchasing the policy and filing a claim. Moreover, concealing or suppressing the medical history or misrepresenting the details will lead to your claim being rejected.

This article first appeared on PersonalFN here