Supreme Court grants medical claim relief to senior citizens

Supreme Court grants medical claim relief to senior citizens

Insurer held responsible to inform holder on changes in the policy conditions and limitations

The Supreme Court has allowed medi-claim relief to two senior citizens holding the insurer responsible for "deficiency in service" under the Consumer Protection Act, 1986.

It held that it was the duty of the insurance agent to disclose to the policyholder the changes regarding the limitation on its liability in the conditions at the time of renewal of the policy.

The bench comprising Justice S Ravindra Bhat and Justice K M Joseph was considering an appeal against an order of the National Consumer Disputes Redressal Commission, which denied relief to the appellants.

The appellants, two senior citizens, had availed a medi-claim policy from United India Insurance (UII) in 1982, which was renewed on a yearly basis. In 2008, one appellant had to undergo angioplasty surgery. Thus, the appellants submitted a claim of Rs.3.82 lakhs to the insurer.

The coverage at that time was Rs.8 lakhs. However, UII accepted the claim for only Rs.2 lakhs. It said that the renewed agreement had a clause, which limited the liability with respect to surgeries like angioplasty to an amount of Rs.2 lakhs.

The appellants challenged this before the District Consumer Forum, which ruled in their favour. However, the State Commission reversed the District Forum's order in the insurer's appeal. Even though the appellants filed a revision before the National Commission, they could not secure relief. The matter, ultimately, reached the Supreme Court.

UII's stand was that a careful reading of the policy for the year 2008-2009 would have indicated that it differed radically from the previous year's policy. (It had added a term indicating a monetary limit on the reimbursable expenditure). UII also argued that it had no legal duty to inform the policyholder about the changes in policy conditions when compared to the lapsed policy. It maintained there was no concept of 'renewal' since it was a fresh agreement executed on an annual basis.

Justice Ravindra Bhat ruled that if the insurer was unilaterally introducing fresh terms about which the policyholder was in the dark, then it could be regarded only as a renewal of the existing terms. The policyholder would be under the impression that the existing conditions were being renewed.

The top court noted that the insurer could not plead that it was the duty of the policyholders to satisfy themselves about the terms and conditions. It observed two important facts – one, the appellants were in need of health insurance due to their advanced age; two, the insurance policies were in standard form, which offered no space for bargain or negotiations.

The judges noted that the insurer had not produced any evidence to show that the agent had disclosed the material changes to the appellants. The judgment also referred to the 2016 Regulations of the Insurance Regulatory and Development Authority (IRDA) of India. It had restricted insurers from compelling an insured to migrate to other schemes and imposed a duty on them for doing the same.

"These regulations only underline expressly what was implicit. The insurer's obligation to inform every policyholder about any important changes that would affect her or his choice of product. These have been given statutory shape. In this case, that obligation was breached," the court said.

Justice Joseph held that a renewed contract of insurance might provide terms, which are different from the original terms in the insurance contract. However, if cumbersome limitations were introduced, the insurer was duty-bound to inform the policyholder.

Reinstating the order of the District Forum, the court directed UII to reimburse the balance cost of surgery to the policyholders.