Failure To Disclose Material Illness Violation Of Utmost Good Faith: NCDRC

Brief Facts of the Case

The complainant, the Chairman of United Shippers Ltd., frequently traveled internationally and held an Overseas Medical CFT policy from United India Insurance/ insurer, which was renewed periodically. Before renewal, the complainant passed a medical test and was declared fit. During a visit to the USA, he experienced a drop in heart rate, was diagnosed with an ECG conduction disturbance, and underwent life-saving pacemaker implantation surgery. He informed the insurer and sought coverage for the medical expenses. However, the insurer denied the claim, citing non-disclosure of previous ailments, including a 2002 angioplasty, and deemed the pacemaker implantation a pre-existing condition not covered by the policy. The complainant argued the issue was unrelated to past cardiac ailments, but the insurer did not accept this. After paying US $50,332.75 to the medical center, the insurer formally repudiated the complainant's claim, leading him to file a complaint with the State Commission, alleging deficiency in service. The State Commission dismissed the complaint. Consequently, the complainant appealed to the National Commission.

Contentions of the Insurer

The insurer contested the complaint, stating the complainant held an Overseas Medical CFT Policy and had submitted the proposal form but failed to disclose complete information. Specifically, he did not mention undergoing angioplasty in 2002, only disclosing a CABG from 1996. The insurer argued that the pacemaker implantation was a pre-existing condition related to the 1996 CABG and, thus, not covered under the policy. They asserted there was no deficiency in their service.

Observations by the National Commission

The commission observed that the complainant held a valid Overseas Mediclaim CFT Policy when he fell ill abroad and received treatment. The proposal form revealed that the complainant answered “no” to having suffered any illness despite having undergone angioplasty in 2002. This non-disclosure was deemed a material fact relevant to the insurer's risk assessment, especially since the complainant had disclosed a 1996 CABG surgery. The commission found that failing to disclose the angioplasty, which occurred after the CABG, violated the principle of utmost good faith. The complainant's assertion that the pacemaker implantation was unrelated to his pre-existing cardiac condition lacked medical evidence. In the case of Sulbha Prakash Motegaonkar vs. Life Insurance Corporation of India, the court decided that there was no connection between the insured's cause of death due to a heart ailment and his pre-existing condition of lumbar spondylitis. Therefore, the insurer's refusal to pay the claim based on the pre-existing condition was not justified. Contrary to the cited case, where there was no connection between the ailments, both the CABG and pacemaker issues were cardiac-related. Hence, the complainant was obligated to disclose the information regarding angioplasty.

The commission concluded that the State Commission's order was well-reasoned and dismissed the appeal

Case Title: Sevantilal J. Parekh Vs. United India Insurance Company Limited

Case Number: F.A. No. 665/2022