A friend of mine was admitted to a reputed corporate hospital in Dehradun in 2025. On the eve of Maha Shivratri, he visited a nearby temple and ate the Prasad offered to him. Soon after consuming it, he became unwell and was admitted to the ICU of a hospital, where he remained for two nights. The hospital diagnosed the case as “unknown substance ingestion, possibly bhang.” Bhang is edible cannabis and is traditionally mixed and consumed with thandai during Maha Shivratri.
The treatment was essentially conservative, yet the hospital bill amounted to ₹44,351. What followed, however, was more unsettling. Despite being covered under a corporate health insurance policy with a cashless facility, the insurer initially denied the claim. He was therefore compelled to pay the entire amount out of pocket.
The insurer invoked the policy exclusion relating to “drug/alcohol/substance abuse.” The stated basis was that the hospital had recorded the possibility of bhang intoxication, which was subsequently relied upon in the investigation.
This raises a fundamental question in health insurance: Does the mere presence or ingestion of an intoxicating substance automatically make a claim one of “substance abuse”?
The distinction is important. A person may suffer an illness because of deliberate substance abuse, but another person may become ill after unknowingly or inadvertently consuming a substance. Treating both situations identically can produce a significant gap between the literal wording of an exclusion and the circumstances that actually led to the hospitalisation.
Insurers do routinely invoke exclusions relating to drug, alcohol and substance abuse. However, the wording of such exclusions varies considerably across policies. Without clear, consistent language, similar cases can receive very different treatment at the claims stage.
The following policy wordings illustrate the problem and, more importantly, highlight the need to distinguish between “use of a substance,” “intoxication,” “substance-induced illness,” and “substance abuse.” That distinction can directly affect whether a genuine hospitalisation is covered or excluded.
A closer look at the following wording makes the issue particularly compelling.
- ‘Any Illness/injury/accident due to abuse or the consequences of the abuse of intoxicants or hallucinogenic substances such as intoxicating drugs and alcohol, including alcohol withdrawal, smoking cessation programs and the treatment of nicotine addiction or any other substance abuse treatment or services, or supplies, impairment of the Insured Person’s intellectual faculties by abuse of stimulants or depressants. This exclusion shall apply only in case illness/accident is caused due to the above-mentioned abuse by the insured.
- Convalescence, general debility, ‘Run-down’ condition or rest cure, obesity treatment and its complications, congenital external disease/defects or anomalies, treatment relating to all psychiatric and psychosomatic disorders, infertility, sterility, use of intoxicating drugs/alcohol, use of tobacco leading to cancer
- ‘Treatment or Death or Disability relating to or arising out of all psychiatric and psychosomatic disorders and/or caused by the use of intoxicating drugs/alcohol’.
- Illnesses or injuries due to the use of alcohol, tobacco, narcotic or psychotropic substances by the Insured.
- Drug/Alcohol Abuse -Treatment for Alcoholism, drug or substance abuse or any addictive condition and consequences thereof.
- All psychiatric and psychosomatic disorders and diseases/ accident due to and use, misuse or abuse of drugs/alcohol or alcohol or use of intoxicating substances or such abuse or addiction etc.
The various options used by different companies vary considerably. In some instances, it just mentions illness or injuries caused by the mere consumption/use of alcohol or drugs….whereas in some cases it is mentioned that the use of the above caused the ailment or injury.
The important distinction is between (a) mere consumption/use of alcohol or drugs and (b) illness, injury or accident that is caused by, arises from, or is a consequence of their abuse is to be noted very carefully – for the kind of difference in impact it can make to claim settlement. The real catch lies in wording using “abuse or the consequences of the abuse”, rather than simply saying “use of alcohol/drugs.
Is mere consumption of liquor/ drugs/substances sufficient to invoke an exclusion of this nature?
An interesting judgment came to light in The National Consumer Disputes Redressal Commission, New Delhi – Revision Petition No. 700 of 2025 (Against the Order dated 25.02.2025 in Appeal No. 761 of 2023 of the State Consumer Disputes Redressal Commission, Punjab)
Facts of the case –
The respondent, Amit Walia, purchased an insurance policy for the period between 29.05.2018 and 28.05.2019, and it was a continuous policy for 16 years. On 29.04.2019, the insured fell ill and was admitted to Fortis Hospital, Mohali, for emergency treatment. Initially diagnosed with a heart attack, but after several tests, it was confirmed that the ailment was caused by pain in the pancreas. However, the insurance company denied the claim on flimsy grounds that the insured was a chronic alcoholic.
The insured filed a complaint before the District Commission, demanding reimbursement of the entire expenses of Rs.3,65,075/- paid to Fortis Hospital, along with compensation of Rs. 1 lakh towards harassment, with interest at the rate of 18%.
The District Commission, vide its order dated 09.08.2023, heeded to the complaint of the insured and directed the insurer to reimburse Rs. 3,65,075/- along with interest @ 9% p.a. from the date of Repudiation. The Court also directed the insurer to pay an additional Rs.15,000/- towards mental agony, harassment, and litigation expenses.
The State Commission, also vide its order dated 25.02.2025, upheld the order of the District Commission. Being aggrieved by the order dated 25.02.2025 passed by the State Commission, the Insurer approached the National Commission by way of the instant Revision Petition, praying for setting aside the orders passed by the District and State Commissions and for allowing the Revision Petition.
Arguments by the Insurer’s Counsel
Insurer’s Counsel argued that the District Commission was wrong in allowing the claim on the ground that the insurer failed to prove that the insured’s illness was alcohol-induced. Insurer’s Counsel contended that the discharge summary itself records the diagnosis as “Acute on Chronic Pancreatitis with Alcoholic Withdrawal.” According to the insurer, this constitutes a clear admission by the complainant and provides sufficient medical evidence to establish a causal link.
The Insurer’s Counsel also argued that the State Commission overlooked the medical terminology in the discharge summary, which attributed the illness to alcohol consumption, which is expressly excluded under the policy.
The Insurer’s Counsel contended that the discharge summary and medical findings show that Splenic Vein Thrombosis and Peritonitis resulted from chronic alcohol use and pancreatitis. He further argued that chronic pancreatitis was a pre-existing condition attributable t Insurer’s Counsel o prolonged alcohol use, while “Alcoholic Withdrawal” indicated alcohol dependency. Accordingly, the claim was excluded under Clause 4.4.6.1, which excludes illnesses or injuries caused by intoxicating drugs or alcohol.
Arguments by the Insured Counsel
The Insured Counsel found that the orders of the District and State Commissions have rightly allowed the payment of the claim, as the insurer produced no medical evidence to vindicate that the ailment was caused solely due to alcohol consumption.
The Insured’s Counsel argued that the State Commission correctly held that the burden of proving material concealment or otherwise establishing valid grounds for Repudiation rests upon the insurance company. This position is supported by the judgment of the National Commission in LIC of India v. Dr P.S. Aggarwal, (2005) CPJ 41 (NC) [2004], which, in turn, followed the principles laid down by the Hon’ble Supreme Court in Mithoolal Nayak v. LIC of India, AIR 1962 SC 814..
It appeared from the medical records that the insured was treated for Chronic Pancreatitis and Obstructive Jaundice. While alcohol consumption is one of the recognised causes of pancreatitis, the condition may also arise from several other causes, including gallstones, elevated triglyceride or calcium levels, certain medications, and genetic factors.
In view of these multiple possible etiologies, it was incumbent upon the insurer to establish, with cogent medical evidence, that the insured’s condition was attributable solely to alcohol consumption before invoking the exclusion relating to alcohol abuse.
The mere casual reference to “withdrawal” in the history section of the record, without any convincing evidence of alcohol dependence, cannot form the basis for repudiation of the claim, as moderate alcohol consumption, being a part of ordinary lifestyle and in the absence of any dominant linkage with an illness, cannot by itself disentitle a person from the benefits of Mediclaim.
Observation of The National Commission.
The National Commission perused the repudiation letter, which stated as follows: “As per observation and opinion & discharge summary of Fortis Heart Institute & Multi speciality Hospital “PATIENT WAS CHRONIC ALCOHOLIC”, thus your diagnosis are related to alcoholic intake which is not covered under the policy terms and conditions as per clause 4.4.6.1 which are already provided to you.”
The Commission further observed that the clinical diagnosis as mentioned in the discharge summary records “Pancreatitis with Alcoholic Withdrawal.” However, this entry, by itself, does not conclusively establish that the pancreatitis was caused solely by alcohol consumption.
It is well settled that where an insurer repudiates an insurance claim by invoking an exclusion clause, the burden of proving the applicability of such exclusion rests squarely upon the insurer. The insurer must establish, by convincing evidence, that the facts and circumstances of the case fall within the specific exclusion relied upon for repudiation.
In support of the above proposition, reliance is placed, inter alia, on the judgments of the Hon’ble Supreme Court in National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 (5) TMI 752 (SC) and Texco Marketing Pvt. Ltd. v. TATA AIG General Insurance Company Ltd., (2023) 1 SCC 428, wherein the principles governing the interpretation and invocation of exclusion clauses in insurance contracts have been reiterated.
It further observed that exclusion clause 4.4.6.1, which excludes “illnesses or injuries caused by intoxicating drugs or alcohol,” must be construed strictly. The exclusion would apply only where the illness or injury is shown to have been solely and proximately caused by alcohol consumption. Mere casual or social consumption of alcohol, in the absence of evidence of alcohol dependency or proof that alcohol was the direct and sole or exclusive cause of the medical condition, cannot by itself disentitle the insured from receiving coverage under the policy.
The Commission held that repudiation of a claim solely based on a casual or incidental entry in the medical record, without any further investigation or supporting evidence, may constitute a deficiency in service under Section 2(11) of the Consumer Protection Act, 2019.
Another interesting aspect emerges from the Madras High Court’s recent judgment in Star Health and Allied Insurance Company Limited v. The Insurance Ombudsman, Chennai (W.P. No. 14547 of 2026 and W.M.P. Nos. 15792 and 15793 of 2026).
In this case, Star Health and Allied Insurance Company Limited, the petitioner, filed a writ petition challenging the award dated 24 November 2025, by which the Insurance Ombudsman directed the petitioner to settle the claim of the second respondent, i.e., the insured. The second respondent, Mr T.S. Ashok Babu, took an Insurance policy from the insurer for the period from 24.12.2024 to 23.12.2025. During the policy period, the insured submitted a bill under the cashless facility for Rs. 3,66,031/- towards medical expenses for the treatment of his Chronic Liver Disease.
The insurer repudiated the claim because the insured failed to disclose in the claim form that he had consumed alcohol and was a known alcoholic for 15 years, citing Standard Exclusion No.12 of the policy. The insured approached the Insurance Ombudsman, who asked the insurer to pay the claim with applicable interest under regulatory norms.
Based on the records placed before the Court
On perusal of the discharge summary, Alcoholic Hepatitis has not been recorded as a diagnosis. Therefore, it cannot be conclusively established that the disease was solely and directly caused by alcohol consumption.
On Exclusion Clause No. 12, which mentions “the Company shall not be liable to make any payments under this policy, in respect of any expenses whatsoever incurred by the insured person in connection with or in respect of: Treatment for Alcoholism, drug or substance abuse or any addictive condition and consequences thereof illnesses or injuries caused by intoxicating drugs or alcohol”, the Court inferred that, from the very wording, the illness should have been solely caused by alcohol consumption.
The Court observed that, in the present case, the diagnosis recorded in the discharge summary does not indicate that the disease suffered by the insured was caused primarily by the consumption of alcohol. Accordingly, the insured could not be denied coverage under the policy on that score.
Author’s Insight
- The various policy wording referred to above convey different interpretations – In some places, it is merely mentioned that the use of intoxicating drugs/alcohol, use of tobacco leading to cancer will invalidate the insurance coverage. In another instance, it states that the exclusion applies only if the illness/accident is caused by the above-mentioned abuse by the insured. The variation in wording is tricky and, as a result, appalling too.
- “Any illness/injury/accident due to abuse or the consequences of the abuse of intoxicants or hallucinogenic substances such as intoxicating drugs and alcohol…” normally conveys a causal connection between the abuse and the illness/injury/accident. If the insurer can establish this causal connection, it can repudiate the claim.
- Mere Consumption Does Not Inevitably Prompt the Exclusion: Mere consumption of alcohol or other substances mentioned in the exclusion clause should not, by itself, be sufficient to repudiate a health insurance claim. The consumption must have a direct and substantial causal connection with the illness or injury for which the claim is made.
Many consume alcohol, or substances like gutka, which can be termed as intoxicating substances” or “substance abuse” or bhang, which can be termed as intoxicating drugs,” “hallucinogenic substances,” or “intoxicants”, depending on the exact policy wording and applicable law in small quantities, and such consumption may not solely lead to a disease. Such consumption, by itself, does not necessarily mean that the person was intoxicated, abusing the substance, or that the consumption caused the illness.
Where an illness has multiple or concurrent causes, the relevant question is whether the excluded substance was the dominant or proximate cause of the illness or injury. If the illness would have occurred independently of such consumption, or the consumption was merely incidental and not a significant cause, the exclusion should not ordinarily apply.
The onus is on the insurer to establish the causal connection between the excluded substance and the illness or injury. Therefore, the mere fact that an insured person had consumed alcohol or another excluded substance does not, by itself, justify repudiation of the claim.
Similarly, a hospital record merely mentioning “smell of alcohol” is not, by itself, sufficient evidence of intoxication, substance abuse, or that alcohol was the cause of the illness or injury. There must be adequate evidence establishing the required causal connection between the consumption and the condition for which the claim is made.
Treatments specifically undertaken for alcohol withdrawal, nicotine addiction, or substance-abuse disorders are excluded under certain policy wordings. However, the mere use or history of such substances should not, by itself, trigger the exclusion. A causal connection must be established between the excluded substance use and the disease or condition for which the claim is made. The insurer must demonstrate that the illness or injury in question was directly and solely attributable to the excluded circumstance,
Therefore, the policy wording needs to be reconsidered and appropriately recast, as such linear and literal construction has caused considerable hardship and uncertainty for suffering policyholders. In light of the principles emerging from various judicial decisions, the wording should instead provide that such diseases or ailments must have arisen solely or proximately—where “proximately” is understood in the sense of being predominantly caused—by such consumption or use. The interpretation should give effect to the underlying spirit and purpose of the exclusion, rather than rely on a merely literal or mechanical construction, particularly in view of the interests and legitimate expectations of consumers.
Authored by:
Prof. (Dr.) Abhijit K . Chattoraj
Chartered Insurer
