Thiruvananthapuram District Commission Holds Reliance General Insurance Co Liable For Wrongful Repudiation Of Genuine Claim

Brief Facts:

The Complainant availed the Bank of India (“BOI”) SwasthyaBima Scheme in 2007. This scheme provided health insurance coverage, initially through United India Insurance Company and later through National Insurance Company. Over the years, the Complainant and her family enjoyed uninterrupted coverage until 2019 when the Reliance General Insurance Company (“Insurance Company”) independently decided to renew the group insurance through BOI.

In January and June 2019, the Complainant's daughter required medical treatment for seizures and subsequent diagnosis of Autoimmune Encephalitis. The Complainant submitted a claim under the SwasthyaBima Scheme. Despite the claim being initially settled for similar treatments in prior years, the Insurance Company repudiated the 2019 claim, stating non-disclosure of a pre-existing seizure disorder in the policy's proposal form. Despite appeals and communications, including recourse to the insurance ombudsman, the claim remained rejected. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Thiruvananthapuram, Kerala (“District Commission”) and against the Insurance Company and BOI.

In response, the Insurance Company contended that the claim was rightly repudiated due to non-disclosure of the pre-existing seizure disorder in the policy's proposal form. It argued that the proposal form serves as the contractual basis and that any material misrepresentation therein allows it to repudiate the claim under the doctrine of 'Uberrimae fidei' (utmost good faith), maintaining they acted within policy terms and conditions. On the other hand, BOI stated that its role was limited as a facilitator in offering the BOI Swasthya Bhima Scheme and clarified that the Complainant dealt directly with the Insurance Company for policy issuance and claims processing.

Observations by the District Commission:

The District Commission noted that under Section 19 of the General Insurance Business (Nationalization) Act, 1972, insurance companies are obligated to conduct their business in a manner that benefits the community to the fullest extent. The District Commission held that the denial of reimbursement on the grounds of a pre-existing condition was arbitrary and an attempt to evade liability, rather than a legitimate reason. The principles of fairness and non-arbitrariness are foundational in equitable behaviour, particularly in matters involving insurance policies. It held that any exclusions or conditions that could impact a claim must be explicitly communicated to the insured and acknowledged by them.

The District Commission held that the Insurance Company failed to demonstrate proper disclosure of the exclusion clause to the Complainant. Consequently, its attempt to repudiate the claim on this basis was held to be impermissible. It held that BOI, acting as an intermediary without involvement in claim repudiation, was absolved of any responsibility. Therefore, the District Commission held the Insurance Company liable for deficiency in services.

Consequently, the District Commission directed the Insurance Company to reimburse Rs. 1,58,333/- to the Complainant with 6% interest. Additionally, it was ordered to pay Rs. 75,000/- as compensation for the mental agony, along with Rs. 2,500/- towards the cost of proceedings.

Case Title: Jancy Biju Varghese vs Reliance General Insurance and Anr.

Case Number: CC/285/2020

Date of Pronouncement: 10th May 2024