Case Title: Manmohan Nanda V. United India Assurance Co. Ltd. & Anr
Summary
The Supreme Court ruled that an insurance company is obligated to provide indemnification for costs incurred in connection with an unforeseen illness or condition that is not explicitly excluded from the policy. In this case, the appellant filed for an overseas mediclaim policy to attend his sister-in-law’s daughter’s wedding in the United States. After undergoing a medical examination at the insurance company’s request, the policy was granted to him.
The appellant received treatment at the SFO Medical Centre and Mills Peninsula Medical Centre, where he underwent angioplasty and three stents. The son-in-law of the appellant initiated communication with M/s Corris International, an overseas affiliate of the insurance company, to evaluate the information. The appellant’s claim was rejected on the grounds that the policy did not provide coverage for complications deriving from pre-existing conditions, including diabetes and hyperlipidemia. The appellant lodged a complaint with the Commission against the respondents under Section 21 (9) of the Consumer Protection Act, 1986, but the complaint was dismissed due to the omission of significant facts. Senior Advocate Gopal Sankarnarayanan and Advocate Zehra Khan argued that the policy specified the coverage’s nature and precluded pre-existing conditions as defined in general condition 10. Advocate Sunaina Phul for the Insurance Company argued that the insurer might not have issued the policy had the appellant disclosed his hyperlipidemia, an existing medical condition at the time the proposal form was submitted.
The Supreme Court has ruled in an insurance company case that the insurer must disclose all material facts by the parties to an insurance policy. The court stated that a “material fact” is any information that affects the fundamental terms of the insurance contract and the risk covered by the policy. The court also noted that negligence cannot be used as an alibi, and an answer that is deceptive due to omissions will not be acceptable.
The court also noted that the insured might be rendered vulnerable at times by the standard of duty of disclosure imposed on them, as the statements contained in the proposal form could be interpreted negatively towards the insurer in accordance with the contra proferentem rule. The court also highlighted the importance of the insured bearing a responsibility or obligation to disclose any significant fact at the moment the proposal is advanced. The court also noted that the health and medical condition of the proposer would also influence what constitutes a material fact in a given case. If an insurance company notes an empty query or column on a proposal form, it is incumbent upon the insured to provide the requisite information. The insurance company reserves the right to obtain information about the proposer’s medical condition, if any, by having one of its appointed physicians examine the proposer.
In conclusion, the Supreme Court ruled that the insurance company’s repudiation of the policy was unlawful and contrary to the law, and the appellant was eligible for indemnification under the policy.
About the case
According to the Supreme Court, in the event that the insured experiences an unforeseen illness or condition that is not explicitly excluded from the policy, the insurer is obligated to provide indemnification for the costs incurred in connection with the condition or illness. In the present case, the bench of Justices DY Chandrachud and BV Nagarathna was deliberating on a civil appeal against the National Consumer Disputes Redressal Commission’s (“Commission”) 22 May 2015 order dismissing the appellant’s Consumer Complaint on the grounds of non-disclosure of material facts.
Manmohan Nanda V. United India Assurance Co. Ltd. & Anr, the bench, in granting the appeal, stated: “The purpose of procuring a mediclaim policy is to obtain indemnification for an unexpected or impending ailment or disease that may transpire while traveling abroad. In the event that the insured experiences an unforeseen illness or condition that is not explicitly excluded from the policy, the insurer is obligated to provide indemnification to the appellant for the costs incurred in reference to the policy. A Factual Context The appellant filed for an overseas mediclaim policy B (“mediclaim policy”) in order to attend the wedding of his sister-in-law’s daughter in the United States of America (“USA”). The appellant underwent a medical examination at the insurance company’s request, prior to the evaluation of his request for a mediclaim policy. The medical examination report unequivocally diagnosed the appellant with type II diabetes (diabetes mellitus).
There was no additional adverse medical condition identified. In response to the inquiries, the insurer approved the proposal form and proceeded to grant the appellant an Overseas Mediclaim Business and Holiday Policy. The policy remained in effect from May 19, 2009 to June 1, 2009. As the appellant exited the customs area of the San Francisco International Airport, he began to feel feeble and perspire. Following medical treatment at the SFO Medical Centre, the appellant was transferred to Mills Peninsula Medical Centre, where angioplasty was conducted on May 19th and 22nd, 2009, and three stents were inserted to clear the obstruction from the cardiac vessels. This procedure was arranged by his wife. To exercise the privileges granted by the mediclaim policy, the son-in-law of the appellant initiated communication with M/s Corris International, an overseas affiliate of the insurance company whose purpose was to furnish the insured with emergency aid and claims management services. M/s Corris International requested specific documents pertaining to the medical center’s treatment and the mediclaim policy in order to evaluate the information in order to determine whether or not to indemnify the appellant. The date of discharge for the appellant was May 24, 2009.
The appellant commenced receiving invoices from the cardiovascular division of the Medical Centre and SFO Medical Centre for the treatment he underwent at their respective facilities two and a half months later. The appellant dispatched a letter containing the discharge summary and all original invoices to the Divisional Manager of the insurance company at their Bhopal office on August 19, 2009. A copy of the letter was also sent to Heritage Health TPA Pvt Ltd. The appellant was notified via letter dated August 22, 2009, by Heritage Health TPA Pvt Ltd. that his claim had been rejected on the grounds that the policy did not provide coverage for complications deriving from pre-existing conditions, including diabetes and hyperlipidemia, which the appellant had a history of. Infuriated, the appellant lodged a complaint with the Commission against the respondents under Section 21 (9) of the Consumer Protection Act, 1986 (“Act”). The complaint lodged by the appellant was dismissed by the Commission due to the omission of significant facts. Representation by Counsels In support of the appellant, Senior Advocate Gopal Sankarnarayanan and Advocate Zehra Khan argued that the policy in question specified the coverage’s nature and precluded pre-existing conditions as defined in general condition 10. Additionally, he argued that the appellant’s rejection of the contract on the basis of suppressing a pre-existing disease was completely unfounded. Senior Counsel additionally argued that the appellant did not possess knowledge of his hyperlipidemia condition at the time the proposal form was submitted. Furthermore, the counsel stated that the appellant is only obligated to disclose any fact if he is aware of it and not otherwise. Additionally, he contended that the wording of the proposal form lacked a specific inquiry that might have prompted the appellant to reveal his hyperlipidemia and that the insurance policy failed to provide definitions for the terms “pre-existing disease,” “pre-existing ailment,” “pre-existing condition,” “disease,” and “illness.”
Additionally, senior counsel argued that the policy itself must specify the nature of any disease or ailment that would disqualify an insured or policyholder from the policy’s benefits. On the contrary, he argued that the language should not be ambiguous or non-specific in a way that would allow the insurer to exploit a claim under the mediclaim policy. Advocate Sunaina Phul for the Insurance Company argued that the insurer might not have issued the appellant’s mediclaim policy had he disclosed that he had hyperlipidemia, an existing medical condition at the time the proposal was submitted. Regarding this, she contended that the insured failed to disclose this crucial information by failing to complete the column pertaining to any illnesses or diseases he had experienced as of the date the proposal form was filled out. Furthermore, she maintained that the omission or non-disclosure of personal medical history pertaining to a pre-existing medical condition on the proposal form was sufficient cause to reject the policy. The Supreme Court’s Evaluation In Justice BV Nagarathna’s opinion, the bench examined the issue by addressing the two points that generated contention in the current appeal: The legal maxim uberrimae fidei, which signifies the principle of good faith, and the corresponding principle mandating the disclosure of all material facts by the parties to an insurance policy both convey the same notion :Rule Contra Proferentem
Subsidiari Fidei The bench stated that a “material fact” is any information that affects the fundamental terms of the insurance contract and the risk that is covered by the policy. The court noted in the judgment that the following fundamental rules must be adhered to when submitting an insurance proposal: (a) The language of the query posed must be interpreted fairly and rationally, and the response provided will be interpreted in the same manner. This requires meticulous consideration of the language employed in both scenarios, as the query may be phrased in such a way that an unequivocal response implies the proposer is certain of the facts and is imparting that knowledge. Nevertheless, as long as these principles are adhered to, precision in all significant aspects will be adequate, while errors or omissions pertaining to trivial and inconsequential details will be disregarded. (b) Negligence cannot be used as an alibi, unless the mistake is manifest to the extent that no one could be considered deceived. It will not be to the proposer’s advantage to assert that he erred by writing ‘no’ when he intended ‘yes’; the answer is obviously the inverse of what he intended. (c) Merely accurate to the extent that it goes, an answer that is deceptive due to omissions, will not be acceptable. Although the proposer’s claim that he has previously filed a claim with an insurance company may be accurate, the statement is false if he has, in reality, filed multiple claims. (d) In cases where the answer space is left empty and the query remains unanswered, it is reasonable to deduce that there is no response to enter. Their reasonable inference leads the insurers astray if there is, in fact, something to input as an answer. Whether this constitutes a simple non-disclosure, in which the proposer makes no affirmative statement whatsoever, or whether he is, in essence, asserting that there is nothing to state, will subsequently be a matter of interpretation. (e) In the event that an insurer receives an unsatisfactory response, which appears to be inconsistent or incomplete, they may be considered to be subject to inquiry. In such cases, insurers are presumed to have waived the need for further information if they issue a policy without conducting further inquiry.
Despite this, as stated in the preceding heading (4), the mere omission of a vacant space is typically not considered adequate to elicit response from the insurers. (f) It may be advantageous for the proposer to enclose multiple queries in brackets and provide a composite response. While providing the insurers with complete and accurate information regarding all aspects addressed in the inquiries, there is no impediment to his action. (g) In the event that, prior to the acceptance of the proposal, any event or circumstance arises that renders an answer outdated or deceptive, it is mandatory to rectify the response, regardless of its initial accuracy and candor. Additionally, the bench expressed the view that the insured might be rendered vulnerable at times by the standard of duty of disclosure imposed on them, as the statements contained in the proposal form could be construed against them. Consequently, specific provisions in the insurance policy might be interpreted negatively towards the insurer in accordance with the contra proferentem rule. The bench noted that the following principles might emerge from the cases Chandmull Jain v. Delhi Development Authority v. Durga Chand Kaushish AIR 1966 SC 1644, Central Bank of India v. Hartford Fire Insurance Co. Ltd. AIR 1965 SC 1288, Md. Kamgarh Shah v. Jagdish Chandra AIR 1960 SC 953, and United India Insurance Co. Ltd. v. Orient Treasures (P) (2016) 3 SCC 49: Contra Proferentem Rule Relying on (i) The insured bears a responsibility or obligation to disclose any significant fact at the moment the proposal is advanced. The definition of a material fact would be contingent upon the characteristics of the insurance policy being considered, the level of risk it seeks to insure, and the inquiries posed in the proposal form. (ii) The health and medical condition of the proposer would also influence what constitutes a material fact in a given case. (iii) When specific inquiries are posed on a proposal form, the insured, who is obligated to disclose all material facts, is expected to provide specific responses. (iv) In the event that an insurance company notes an empty query or column on a proposal form, it is incumbent upon the insured to provide the requisite information. If the insurance company accepts the premium and issues a policy despite any column being left unfilled, it will be precluded from later asserting that a material fact was omitted or withheld and attempting to refute a claim made under the policy. (v) The insurance company reserves the right to obtain information about the proposer’s medical condition, if any, by having one of its appointed physicians examine the proposer. If the insurance company, after reviewing the medical report, determines that the proposer’s medical condition is satisfactory and that there is no risk of pre-existing illness, and issues the policy based on this determination, it cannot subsequently refute the insured’s claim on the grounds that there was a possible pre-existing illness or illness that prompted the claim. (vi) Prior to the issuance of the insurance policy, the insurer must possess the capability to evaluate the probable hazards that could emerge from the insured’s statement of health and pre-existing conditions, if any, on the proposal form.
After evaluating the insured’s medical condition and issuing the policy, the insurer is unable to refute the claim on the basis of an existing medical condition that the insured disclosed in the proposal form and that has contributed to the specific risk at issue in the insured’s claim. (vii) Put simply, a judicious insurer must assess the potential risk that the policy would be required to cover and make an informed decision regarding whether to accept the proposal form and issue a policy or decline. The success of this endeavor is contingent upon the responses provided by the proposer to the inquiries posed in the proposal form. Therefore, in granting the appeal, the bench noted that the insurance company’s repudiation of the policy was unlawful and contrary to the law; as a result, the appellant was eligible for indemnification under the policy.
