Consumer Commission denies relief to Mediclaim policy holder for non-disclosure

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Recently, we came across news of a judgement in a leading online Publication, Zeenews.com

Non Disclosure in Proposal fom

New Delhi: The National Consumer Commission has upheld the rejection of a Mediclaim of person, who suffered a heart attack within a week of taking an insurance policy, saying he failed to disclose the past history of the disease to the company.  

"It is well settled that principle of insurance is fundamental to utmost good faith which must be observed by the contracting parties and good faith forbids either party from non-disclosure of the fact which the parties know," the Commission said.

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Experts from Medimanage.com give their opinion:

KS Sankar:

KS Sankar

Whilst on our friend Chandra I will refrain from commenting for want of adequate information on facts of the case, purely from the legal perspective, I actually see the silver lining behind this apparently dark – not in favour of consumer – cloud. Read decision.

Insurers in their policies had been trying to disown liability for claims traceable to preexisting conditions, irrespective of whether the insured person was aware of such conditions are not. In the subject judgment, however, the Ld. Commission’s surmise that Chandra ought to have known about his heart condition stems more from the legal position of ‘res ipsa loquitar’ (In the normal course) than from a ‘reasonably expected to know’ stand point.

Let’s talk English and not Law. In simple English, the difference is this:

Through their policy wordings, insurers attempt to disown liability for claims traceable to any pre-existing condition that the insured person is reasonably expected to know. Imagine I had been having some symptoms of hypertension but had not recognized them to be such symptoms – In its strict application, the pre-existing condition exclusion in the policy will render me ineligible for a claim. ‘Cause I was reasonably expected to recognize these symptoms to be indicative of Hypertension. This is the ‘reasonably expected to know’ stand point.

The judgment however evolves around Chandra suffering heart attack within a week of taking the policy. The Ld. Commission has taken specific reference to this occurrence happening within a week - "It would be too much of a coincidence to argue that within a week of the complainant taking the policy, he had a sudden heart attack and from the available records, we cannot but hold that he had a past history which was not disclosed for reasons best known to him," the Commission said. This judgment will therefore not become an authority (an authority is a previous judgment relying on which a current case can be decided) in a case where, say, a Surya suffers a heart attack in the eleventh month of his first policy.

The judgment also specifically says "It is well settled that principle of insurance is fundamental to utmost good faith which must be observed by the contracting parties and good faith forbids either party from non-disclosure of the fact which the parties know," the Commission said. (Highlighting mine). So, the insured knowing and not disclosing is what can result in insurer rescinding liability, not merely the insured being reasonably expected to know.

Significantly again, the Ld. Commission, in its wisdom, has passed this judgment based on the basic principle of insurance (utmost good faith), and not a reference to the exclusion condition in the policy contract.

So this judgment does not uphold insurer’s self proclaimed ‘right’ to disown liability on non-disclosure of what the insured person does not know or was merely reasonably expected to know.

Thank Lord Dharma there still are judges who give speaking judgments!

Sudhir Sarnobat:

Sudhir Sarnobat

This is an interesting decision under Mediclaim policy where the judgement is given against the health insurance buyer.

Many of the insurance agents misguide the buyers & push them to Buy health insurance policy so that they can get a claim.

They believe that Health Insurance Company will overlook this & they can get their claim by managing the officials at TPA or Insurer or by suppressing the facts while getting the hospitalisation done.

Health insurance is not a lottery where people can pay a premium of Rs. 5000 and get guaranteed return of 2-3 Lakhs.

We believe that with this judgement Mediclaim buyers would not wait till the illness strikes them to buy health insurance policy. They would buy it earlier to gain peace of mind which is essential principle of the insurance.

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