Supreme Court recently noted that an insurer cannot repudiate a claim by citing an existing medical condition that was disclosed by the insured in the proposal form, once the policy has been issued.
The apex court bench comprising Justice DY Chandrachud and Justice BV Nagarathna was hearing an appeal filed by one Manmohan Nanda. The petitioner had challenged a National Consumer Disputes Redressal Commission (NCDRC) order rejecting his insurance claim for the medical expenses incurred in the United States.
“A proposer is under a duty to disclose to the insurer all material facts within his knowledge. The proposer is presumed to know all the facts and circumstances concerning the proposed insurance,” the bench said.
While the proposer can only disclose what is known to him, the proposer’s duty of disclosure is not confined to his actual knowledge, it also extends to those material facts which, in the ordinary course of business, he ought to know, the bench added.
The two-judge bench observed, “Once the policy has been issued after assessing the medical condition of the insured, the insurer cannot repudiate the claim by citing an existing medical condition, which was disclosed by the insured in the proposal form and which condition has led to a particular risk in respect of which the claim has been made by the insured.”
Nanda had opted for Overseas Mediclaim Business and Holiday Policy as he was planning to go to the US. He lived in San Francisco and suffered a heart attack there. He was admitted to the hospital and angioplasty was performed on Nanda. Three stents were inserted to remove the blockage from the heart vessels.
He claimed the treatment expenses which was denied by the insurer citing the reason that the appellant had a history of hyperlipidemia and diabetes.
In the NCDRC order, it was concluded that since the complainant had been under statin medication, which was not disclosed while buying the mediclaim policy, he failed to comply with his duty to make a complete disclosure of his health conditions.
The top court found that the insurer repudiating the claim was illegal and not in accordance with the law. The bench further added that the object of buying a mediclaim policy is to seek indemnification in respect of a sudden illness or sickness that is not expected or imminent and that may occur overseas.
“If the insured suffers a sudden sickness or ailment, which is not expressly excluded under the policy, a duty is cast on the insurer to indemnify the appellant for the expenses incurred thereunder,” stated the bench.