Non-Mentioning Of Disease Is Immaterial For Renewal Of Insurance Policy When The Deceased Died Due To Different Disease- SC

A Bench comprising of Justice Abhay S. Oka and Justice Rajesh Bindal held that “even the Insurance Company accepted the fact that non-mentioning of the disease from which the deceased wife of the appellant suffered at the time of purchasing the policy was not material, as the death was caused from a different disease all together. Now, the insurance company cannot be permitted to raise same plea to deny renewal of insurance policy to the appellant.”

Further delving upon the premium charges paid by the Appellant, the Court said “The amount of premium charged by the insurance company for renewal of policies has not been refunded. Meaning thereby the premium for renewal of the policies for the period in dispute stands paid.”

Senior Advocate Suruchii Aggarwal appeared for the Appellant while AOR Parijat Kishore appeared on behalf of the Respondent.

The Appeal challenged the common order dated November 26, 2018 passed by the National Consumer Disputes Redressal Commission (National Commission). The Plaintiff had purchased a health insurance policy from the Respondent for his family, for the period of July 7, 2007 to July 6, 2008. The coverage was for ₹2 lakhs against any health problem and ₹4 lakhs in case of critical illness. The policy was further renewed up to July 6, 2009.

The now deceased wife of the Appellant was suffering from Ovarian Cancer. Two separate set of claims were filed of ₹ 91,496 and ₹4,14,464 by the Appellant. The claim was rejected by the insurance company on the ground that the appellant’s wife was suffering from rheumatic heart disease and the same was not disclosed in the proposal form.

The Appellant filed a complaint in the District Consumer Forum against the rejection of claim. Vide order dated September 11, 2009, the District Forum directed the insurance company to reimburse the expenses incurred by the appellant on treatment of his wife along with interest @ 8% p.a. Further, refusal to renew insurance policy was found to be arbitrary. Direction was issued for renewal of the health insurance policy upon payment of premium.

The Respondent challenged the order in State Commission which was rejected vide order dated December 23, 2010. A Revision Petition was filed in the National Commission which upheld the directions of the State Commission to the extent of reimbursement of expenses incurred on the treatment of the deceased wife of the appellant, however, the direction for renewal of the health insurance policy was set aside.

The Court examined the validity of rejecting the renewal of Insurance. The relevant clause is extracted below from the IRDA letter dated March 31, 2009 which states “A health insurance policy shall be ordinarily renewable except on grounds such as fraud, moral hazard, or misrepresentation.”

In the present case, the request to renew the Insurance was rejected on the grounds that the appellant had failed to disclose that his wife was suffering from rheumatic heart disease. Not agreeing with the findings, the Court held that “The rejection of the claim on the ground that there was concealment of certain material facts by the appellant at the time of purchase of policy, was not found to be tenable and the insurance company was directed to reimburse the expenses incurred for the period from 07.07.2007 to 06.07.2009. The aforesaid amount was paid by the insurance company. The order passed by the National Commission was not challenged any further by the Insurance Company.”

Further, the Court observed that “The amount of premium charged by the insurance company for renewal of policies has not been refunded. Meaning thereby the premium for renewal of the policies for the period in dispute stands paid.”

Accordingly, the Appeal is allowed and the Insurance Company is directed to renew the policy.

Cause Title: Om Prakash Ahuja v. Reliance General Insurance Co. Ltd.

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