1. INTRODUCTION
Insurance policy is a species of a contract meaning thereby the relationship between the parties are strictly governed as per the mutually accepted terms and conditions of the insurance contract without any scope of addition or alteration in the terms and conditions thereof. However, in some aspects, an Insurance contract is distinct from a regular contract viz. on the applicability of the principle of uberrima fides (i.e Utmost good faith), it being a contract of indemnity etc.
The on-going coronavirus pandemic has severely overburdened the healthcare system of our country with many people requiring immediate hospitalization and treatment from this disease which in turn has resulted in manifold increase in insurance claims, acute shortage of beds and medicines. On admission of any patient to a Hospital for treatment against any disease or infection including coronavirus, one of first thing to do is to inform the concerned insurance company of the same either directly via e-mail or through the concerned Third Party Administrator (TPA) in the treating Hospital. Early intimation hospitalization of the insured is also necessary if one seeks to avail cashless medical facility. It may be mentioned that delay in informing the insurance company is one of the most common ground for repudiation of insurance claims or their settlement on a non-standardised basis although both the Insurance Regulatory Development Authority (IRDAI) and the Consumer forums have time and again deprecated this practice of repudiating insurance claim on technical pleas such as delay of intimation, non-submission of required documents etc.
It is always advisable to read each and every terms and conditions of the insurance contract meticulously before executing the same as it is only on the any breach of any terms thereof that any dispute may arise in future between the contracting parties, one amongst such terms in a life or a health insurance policy is regarding disclosure of pre-existing diseases of the insured.
II. INSURANCE POLICY & PRE-EXISTING DISEASES –ALONGWITH OTHER RELATED CONCEPTS
As mentioned hereinabove, the contract of insurance is based upon the cardinal principle of uberrima fides which means that the proposer (i.e. insured) is bound to disclose all relevant facts within his knowledge including his/her pre-existing diseases, this is necessary as on the basis of this information provided by the insured in his proposal form and other documents submitted by the insured, that the insurance company arrives at the decision if insurance coverage is to be granted to the proposer or not and if yes, at what terms and conditions, premium amount, coverage etc.
The fact that the insured suffers from a pre-existing diseases has a materially bearing on the premium amount of the insurance policy thus it is often argued by the insurance companies that the proposer has intentionally and deliberately hidden his/her pre-existing disease(s) in order to save the premium amount thus causing wrongful financial loss to the insurance company and thus the insured has resultantly violated the principles of uberrima fides reference in this regard can be made to P C Chacko V. Chairman, Life Insurance Corporation of India[1], Satwant Kaur Sandhu V. New India Assurance Company Limited[2] etc.
Thus, as a general thumb rule, the insurance form should always be filled by the proposer himself rather than getting the same filled by your family member or anybody else. Further, the exception clause (i.e diseases not covered under the Insurance Policy) and the waiting period must also be read carefully. A lot of times it is often written in the insurance policy that the detailed terms and conditions of insurance policy are mentioned on the website of the insurance company, the proposer should also read these terms as well.
The hon’ble NCRDC in case titled as M/s. Aviva Life Insurance Co. India Pvt. ltd. V. Phool Kanwar[3] while upholding the repudiation of the insurance claim by the insurance company opined in relation to non-disclosure of pre-existing disease that –
‘18. It is settled principle of law that the contract of insurance is a contract uberrima fides and there must be complete good faith on the part of the life assured at the time of submitting proposal form for obtaining the policy and the assured is under a solemn obligation to make full disclosure of material facts with regard to his state of health because the same was relevant for the insurer to decide as to whether the Insurance Policy is to be issued to the proposer or not.
19. Since, the deceased life insured was suffering from Diabetes Mellitus and Hypertension for over two years but he did not disclose these facts while making the proposal statement and has violated the terms and conditions of the insurance policy, therefore, respondent-wife of life insured, is not entitled for any insurable benefit.’
However, the hon’ble NCRDC has in Neelam Chopra V. Life Insurance Corporation[4], and New India Assurance Company V. Rakesh Kumar[5], in reference to lifestyle diseases such as diabetics, hypertension has taken a different view as expressed in Phool Kanwar’s case and has further opined that non-disclosure of any information relating to pre-existing disease if it has not resulted in death of the insured or has no direct relationship to cause of death, would not completely disentitle the claimant i.e. insured for the claim, in Neelam Chopra’s case (supra) , the hon’ble NCRDC opined that ‘..the insurance claim cannot be denied on the ground of these life style diseases that are so common. However, it does not give any right to the person insured to suppress information in respect of such diseases. The person insured may suffer consequences in terms of the reduced claims…In addition, this disease of LL Hansen has no relationship with the actual cause of death i.e. “Cardio Respiratory Arrest” and in the light of judgement of the Hon’ble Supreme Court in Sulbha Prakash Motegaonkar. Vs. Life Insurance Corporation of India (supra), its suppression would not lead to total denial of the claim. So, I am of the view that even if any information was suppressed in the proposal form, it cannot be treated as material information…’
Another case on this point, is the recent judgement of the Hon’ble Supreme Court in Branch Manager, Bajaj Allianz Life Insurance Company Ltd and Ors V. Dalbir Kaur[6], decided on 8.10.2020, wherein the hon’ble Court distinguished the judgement of the hon’ble Supreme Court in Sulbha Prakash Motegaonkar’s case and held that the same was in relation to concealment of an ailment by the deceased which was not a life-threatening disease, however in the present case as the insured was from a serious pre-existing medical condition the repudiation by the insurance company was held to be valid.
Generally, there can be two scenarios in respect to non-disclosure of pre-existing diseases; first is when the insured knew that he/she is suffering from a pre-existing disease(s) but intentionally omits to mention the same in the insurance policy, in such a case if claim is repudiated by the insurance company due to non-disclosure of the same, the insured may still be able to get his claim if the treatment of the insured was for a disease which has no connection to the pre-existing disease or if the concealment of an ailment by the insured was not a life-threatening disease, however, this maybe bone of contention in Courts due to conflicting judgements on this point by various different Courts.
The second scenario that may arise is when the insured himself is not aware of that he/she is suffering from a certain diseases or mistakenly assumes a symptom to be routine pain for example a person may mistake a chest discomfort to be a sign of fatigue rather than an underlying heart problem. In such a case, the fact whether the concealment is deliberate or not assumes significance importance and the same being a question of fact the answer would differ from case to case bases. Expounding upon the test to find out whether the concealment of a material fact was intentional or not the Hon’ble Supreme Court in Life Insurance Corporation of India V. Asha Goel[7] opined that ‘..whether there has been suppression of any material facts it may be necessary to also examine whether the suppression relates to a fact which is in the exclusive knowledge of the person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person..’. Likewise, the hon’ble NCRDC in Branch Manager, Bajaj Allianz Life Insurance Co. Ltd. V. Dalbir Kaur[8], distinguishing between a symptom, sign and illness held that in para 10 that ‘…A judicious and apt balance has to be maintained between, on the one hand, an attempt at insurance fraud by (intentional and wilful) material concealment of pre-existing disease, which, it goes without saying, should be most strictly curtailed, and, on the other hand, to restrain insurance cos. to, anyhow, one way or the other, after the death of the insured has occurred, and after the claim has been lodged, arrive with an “investigative report” of “material concealment of pre-existing disease”,…’
Another argument that is often advanced in Courts is on the premise that as the insured had undergone compulsory medical examination by a doctor at the instance of the insurance company before availing the health insurance, the insurance company cannot take the defence that the insured had intentionally hidden his/her pre-existing diseases. However, recently the hon’ble State Consumer Disputes Redressal Forum, Chhattisgarh has negated this argument to be flawed and has held that it may not possible to find out entire medical history of the proposer during the medical examination and the proposer, even in such a case, is not absolved of his contractual obligation to disclose all relevant and material fact in his knowledge.
One of the important section which often comes into play in disputes regarding life insurance policies is section 45 of the Insurance Act, 1938[9] which states no policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e., from the date of issuance of the policy or the date of commencement of risk unless certain exception as mentioned therein are met such as deliberate misstatement or suppression of a material fact, fraud etc. The afore-said section seeks to grant additional protection to the insured against arbitrary dishonour of genuine claims by the insurance company.
In addition to afore-said, keeping in view the on-going pandemic and upholding the paramount interest of an consumer, the IRDAI has from time and again issued several directions and circulars on various aspects such as Cashless Claims under a health insurance policy[10], Reimbursement claims[11], Norms on settlement of health insurance claims[12], short term health insurance policies providing coverage for COVID-19 disease[13], Hospitals should not insist on cash payment from Policyholders[14] etc. In addition thereto, the contracting parties are also bound by various rules and regulations enacted from IRDAI from time to time such as Insurance Regulatory And Development Authority Of India (Third Party Administrators- Health Services) Regulations, 2016[15], Insurance Regulatory And Development Authority of India (Health Insurance) Regulations, 2016[16]
In case of any dispute against an insurance company, the insured in general has three legal remedies which are as under –
1. Filing a Consumer Complaint against the Insurance Company under the Consumer Protection Act, 2019 seeking compensation, claim amount alongwith interest, litigation cost etc.;
2. Can approach the Insurance Ombudsman;
3. Can also file Ordinary Suits or Order 37 suits for recovery of money before the concerned district court.
All these remedies are different in various aspects such as the Insurance Ombudsman is regulated by the Insurance Ombudsman Rules, 2017; the Consumer Forums derive their power and procedure from Consumer Protection Act, 2019 whereas the procedural aspects of Ordinary Suits or Order 37 suits are governed by the Code of Civil Procedure, 1908.
III. CONCLUSION
An insurance policy is a species of a contract and the insured should read all the terms and conditions thereof before signing the same. Further, the insured should also disclose all the relevant and material facts in the proposal form truthfully without hiding any information in order to avoid any unnecessary dispute at the time of claim submission and in case of any query or ambiguity, clarifications must be sought form the concerned insurance company.
Note:-
[1]AIR 2008 SC 424
[2](2009) 8 SCC 316
[3]Revision Petition No. 2877 OF 2013
[4]Revision Petition No. 4461/2012
[5]Revision Petition No. 2157/2014
[6]Supreme Court Civil Appeal No. 3397 of 2020
[7](2001) 2 SCC 160
[8]Revision Petition No. 522 OF 2019
[9]Act No. 4 of 1938
[10]Ref. No:IRDAI/HLT/REG/CIR/011/01/2021 Dated:13-01-2021
[11]Ibid
[12]Ref. No: IRDAI/HLT/MISC/CIR/95/04/2020 dated 18.4.2020
[13]Ref. No: IRDAI/HLT/REG/CIR/156/06/2020 dated 23.6.2020
[14]IRDAI/HLT/MISC/CIR/102/04/2021 dated 23rd April, 2021
[15]Vide Notification No. IRDAI/Reg/17/129/2016 dated 12th July 2016 published in the Gazette of India, Extraordinary Part III – Section 4, vide No. 293 dated 12th July 2016 (w.e.f 18-07-2016)
[16]Vide Notification No. IRDAI/Reg/17/129/2016 dated 12th July 2016 published in the Gazette of India, Extraordinary Part III – Section 4, vide No. 293 dated 12th July 2016 (w.e.f 18-07-2016)
****
The Article has been authored by Mr. Ananth Kini, advocate by profession, practising before the Hon’ble Supreme Court of India, Hon’ble High Court of Delhi, NCRDC, SCRDC, NCLAT etc. situated in New Delhi. Author can be reached at advananthkini@gmail.com for any suggestions/comments.
Author Bio
Very informative and useful article!!