Insurer Cannot Rely On Exclusion Clause If Reason For Rejection Is Not Specified: NCDRC

Brief Facts of the Case

The complainant's daughter-in-law had purchased a medi-claim insurance policy from National Insurance/ Insurer with coverage for critical diseases. When the complainant experienced health issues, he underwent medical treatments including angioplasty, and incurred significant expenses. The complainant filed a total claim of Rs.3,26,014, but the insurer only approved Rs.45,508, denying the rest based on policy terms. The complainant filed a complaint with the District Forum which dismissed the complaint. The complainant appealed before the State Commission of Rajasthan which allowed the complaint and set aside the order by the District Forum. Consequently, the insurer filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer argued that the State Commission failed to exercise its jurisdiction properly and acted illegally. They contended that the reimbursable medical expenses were paid to the complainant according to the policy coverage, but angioplasty expenses were not covered under the critical illness section and, therefore, were not paid. The insurer emphasized that the terms and conditions of the insurance policy are binding and govern the rights and obligations of the parties involved. Citing the Supreme Court case of Deokar Exports (P) Ltd. v. New India Assurance Co. Ltd., they argued that no exceptions can be made on grounds of equity in an insurance policy. Additionally, in United India Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera & Ors., the Supreme Court held that exclusion clauses in a medi-claim policy must be enforced. The insurer argued that the policy explicitly excluded angioplasty and other intra-arterial procedures, and therefore, the State Commission erred in allowing the claim.

Observations by the National Commission

The National Commission observed that the policy documents submitted by the insurer and the complainant were completely different, revealing that the insurer had submitted incorrect documents. This discrepancy led the Commission to direct the Managing Director of the National Insurance Company to investigate the circumstances under which the wrong document was filed and to take appropriate action against the responsible officials. Considering the correct policy document provided by the complainant, which the insurer accepted as accurate, the Commission examined the merits of the case. The complainant had filed claims totaling Rs.3,26,014, but the insurer approved only Rs.45,508. The complainant argued they were entitled to 90% of the claim amount, thus seeking Rs.2,80,506. Furthermore, the commission cited M/s Galada Power and Telecommunications Ltd. v. United India Insurance Co. Ltd. & Anr., wherein it was held that the insurer cannot rely on the exclusion clause in the insurance policy as a defense because they did not specify the reason for rejecting the claim.

The commission upheld the state commission's order and dismissed the revision petition.

Case Title: National Insurance Co. Ltd Vs. Reena Sharda

Case Number: R.P. No. 1197/2018