"Cannot Force Citizens To Run From Pillar To Post": Bombay HC Slaps ₹1 Lakh Cost On Insurance Company For Circumventing Ombudsman's Order

The Bombay High Court on Monday, while slapping exemplary costs of Rs 1 lakh on an insurance company, ordered the Insurance Regulatory and Development Authority (IRDA) and the Ministry of Finance to consider coming up with a mechanism to keep a check on insurance companies as to whether they are complying with the orders of the Insurance Ombudsman.

A division bench of Justices Mahesh Sonak and Jitendra jain was irked to note that despite a clear order of the Ombudsman passed on May 3, 2021 directing the insurance company - Oriental Insurance Company Limited, to pay Rs 27.13 lakhs to one Bharat Dedham (68), the company did not pay the same, citing some or the other reason.

"Insurance companies' disobedience contributes to the harassment of citizens, particularly senior citizens. This harassment is most acute when health insurance claims are not settled within a reasonable period or withheld for frivolous or sometimes even extraneous reasons. The IRDA's efforts to avoid all this are then frustrated by errant insurance company officials. Instances are scarce where insurance company officials are made to account for the losses caused to the insurance companies due to frivolous defences, unreasonable delays in settlement of health insurance claims, mounting interest etc.," the bench observed in its order.

Forcing the citizens to run from pillar to post, forcing the citizens to litigate and increasing the long winding queues in the Courts, and ultimately creating a climate where a citizen feels it is better to yield to officials' unofficial demands reflects on governance issues in these very sensitive areas, the judges underscored.

The bench referred to the notification issued by the IRDA and the Ministry of Finance on April 25, 2017, which provided for a mechanism for quick and easy settlement of at least health insurance claims. However, such instances as in the instant case, the bench said, such efforts are frustrated. 

"The IRDA must, therefore, consider whether, in addition to the mechanism already provided, any further directions or advisories could be issued to the Health Insurance providers to report compliances or for the IRDA to monitor compliances so that policyholders are not forced to approach Constitutional Courts only to enforce Ombudsman's awards. The IRDA must also consider having some digital monitoring system so that it has data on the awards made under its April 2017 Notification and the status of compliances," the bench ordered.

The bench also ordered the higher-ups in the insurance company, to conduct an inquiry against the erring officials, who delayed compliance of the order of the Ombudsman. It said that similar such departmental inquiry orders, have been frustrated even in the past by some government departments or public sector undertakings by conducting cursory inquiries and concluding that no officials was responsible. 

"In any event, in such a situation, the highest officials of the Insurance Company will have to accept the responsibility and face the consequences," the bench made it clear.

The order was passed on a petition filed by Dedhia, who sought directions for implementation of the Ombudsman's order to the insurance company to pay Rs 27.13 lakhs, as a full and final settlement, to his claim. 

While Dedhia claimed to have spent Rs 21.87 lakhs for the coronary artery disease (CAD) surgery, that he underwent in the Breach Candy hospital in Mumbai, the Insurance company argued that other of its clients, spent much lesser amounts for the very surgery at the same hospital. It even pointed out that the doctor, who performed the surgery of Dedhia and other clients, was also the same. 

The company, therefore, had offered to pay only Rs 5 lakh as a full and final settlement. 

In its separate petition, before the judges, the company questioned the jurisdiction of the Ombudsman in ordering payment of Rs 27.13 lakhs especially when the insured amount was Rs 25 lakhs. 

However, the court found no perversity in the Ombudsman's order and therefore upheld the same and ordered the company to pay Rs 27.13 lakhs to Dedhia.

Appearance:

Advocates Aseem Naphade, Nishtha Malik, Sonali Kochar, Bijal Soni and Tejas Horambe instructed by NAS Legal Advocates appeared for Dedhia.

Advocate S Dwivedi represented the Insurance Company.

Advocates Karuna Yadav and Parag Vyas represented the Union of India.

Case Title: Bharat Dedhia vs Union of India (Writ Petition 2903 of 2021)

Click Here To Read/Download Judgment