Case Title: Om Prakash Ahuja V. Reliance General Insurance Co. Ltd.| Civil Appeal No.s 2769-2770 of 2023
Summary
The Supreme Court ruled that an insurance company cannot refuse to renew or pay for additional claims based on the concealment of a disease at the time of policy purchase, as it was not related to the disease that caused mortality. The case involved an insurance company that failed to reimburse the appellant for expenses incurred during his wife’s treatment and the renewal of the policy was denied due to the appellant’s failure to disclose that his wife was afflicted with rheumatic heart disease at the time of the initial policy purchase.
The National Commission issued an interim order directing the renewal of the policy in accordance with the direction issued by the District Forum, as upheld by the State Commission. The insurance company appealed the decision to the National Commission, but the Commission resolved both Revision petitions through a unified order.
The National Commission disregarded the directive to renew the policies beyond 2009 due to the appellant’s failure to disclose the disease at the time of policy acquisition. The Supreme Court observed that the insurance company had already accepted the order and had repudiated its claim. The order of the National Commission was set aside, and the order passed by the District Forum and State Forum regarding the direction to the insurance company to renew the policies was restored.
The Supreme Court emphasized that the absence of a reference to the disease at the time of policy purchase was irrelevant, as the death was the result of a distinct illness. The insurance company is now prohibited from using the same argument to deny the appellant’s insurance policy renewal for the period commencing on July 7, 2009.
About the case
On Tuesday, the Supreme Court ruled that the claim for reimbursement of expenses must be paid if a person has a valid insurance policy in their favor. It was also noted that the insurance company cannot later refuse to renew or pay for additional claims on the basis of the concealment of a disease at the time of policy purchase, as it was not related to the disease that caused mortality.
A division bench consisting of Justice Abhay S Oka and Justice Rajesh Bindal was reviewing an appeal filed by a spouse who had lost his wife to ovarian cancer.. The appellant’s grievance was that the insurance company failed to reimburse him for the expenses he incurred during his wife’s treatment. The renewal of the insurance policy was also denied on the basis that the appellant failed to disclose that his wife was afflicted with rheumatic heart disease at the time of the initial policy purchase, despite the fact that the cause of her death was ovarian cancer.
The appellant’s challenge to the National Commission’s order was dismissed by the Apex Court, which reinstated the Order passed by the District Forum and State Forum directing the Insurance Company to renew the policies. The Apex Court noted that the Insurance Company had already accepted the repudiation of claim, which had been previously set aside by the lower forum:
“…even the Insurance Company acknowledged that the absence of a mention of the disease that the appellant’s deceased wife was afflicted with at the time of the policy’s purchase was inconsequential, as the death was the result of a distinct illness.” There was no connection between the two. The insurance company is now prohibited from utilizing the same argument to deny the appellant’s insurance policy renewal for the period commencing on July 7, 2009. The Court observed.
The insurance company denied the appellant’s wife’s claims for treatment in 2008. The appellant had approached the district forum in order to challenge this. The insurance company’s repudiation of claims was set aside by the District Forum, which accepted the complaint. The District Forum found no correlation between the disease that the wife was alleged to have concealed and the disease for which she received treatment. The insurance company was instructed to renew the policies upon payment of renewal charges, commencing from the date of their expiration.
The insurance company appealed the district forum’s decision to the State Commission; however, it was ultimately dismissed. The insurance company appealed the State Commission’s order to the National Commission. The insurance company’s challenge to the National Commission was in opposition to the directive for the renewal of the insurance policy effective July 7, 2009. The appellant’s expenditure for treatment was not contested and was promptly reimbursed.
The insurance company contended that the renewal was denied due to the guidelines established by the Insurance Regulatory and Development Authority on 31.03.2009, which stipulate that renewals may be denied on the basis of fraud, moral hazard, or misrepresentation.
Subject to the ultimate outcome of the revision petition, the National Commission issued an interim order that directed the renewal of policy in accordance with the direction issued by the District Forum, as upheld by the State Commission. The insurance policy was renewed on numerous occasions in accordance with the Commission’s interim order. In October 2011, the policy that was in effect from July 7, 2009, was renewed.
The appellant filed an additional complaint in 2012 seeking reimbursement for the amount spent on his wife’s treatment from 2009 to 2011, which was rejected by the insurance company. The insurance company denied the claim on the basis that the renewal of insurance policies for the specified period was currently under appeal before the National Commission. The appellant was, however, directed to reimburse the District Forum for expenses, and the State Commission upheld the District Forum’s orders.
The insurance company also challenged the State Commission’s order before the National Commission, and the Commission resolved both Revision petitions through a unified order.
As a result of the appellant’s concealment of facts during the policy purchase, the National Commission in its common order disregarded the directive to renew the policies beyond 2009. The appellant’s failure to disclose that his wife was already afflicted with rheumatic heart disease at the time of policy acquisition resulted in the commission rejecting the claim for reimbursement of treatment expenses. At the Apex Court, the Appellant objected to this.
The Apex Court observed that the insurance company had already accepted the order and had repudiated its claim. Consequently, the order of the National Commission was set aside, and the order passed by the District Forum and State Forum regarding the direction to the insurance company to renew the policies was restored. It was observed that the insurance company was unable to deny the appellant’s further claim or renewal after the appellant’s dues were paid, as directed by the subordinate authorities.
“The appellant is seeking to deny the renewal of his insurance policy on the basis that he neglected to disclose that his wife, who is now deceased, was afflicted with rheumatic heart disease at the time of the initial policy purchase.” Despite the fact that she succumbed to illness. The appellant’s initial policy, which was valid from July 7, 2007, to July 6, 2008, was subsequently extended for an additional year. The claims were rejected, even during the period in which the appellant had a valid policy. The Insurance Regulatory and Development Authority’s guidelines, as expressed in a communication dated March 31, 2009, were invoked to deny the renewal of the policy beyond 07.07.2009. The appellant’s claim was rejected on the basis of the non-disclosure of the disease that his wife (now deceased) was afflicted with at the time of the initial policy purchase. The Fora at various levels under the Consumer Protection Act, 1986, considered the insurance company’s repudiation of the claim. The insurance company was directed to reimburse the expenses incurred from 07.07.2007 to 06.07.2009, as the claim was not found to be tenable due to the appellant’s concealment of certain material facts at the time of policy purchase. The insurance company paid the aforementioned sum. The Insurance Company refrained from contesting the National Commission’s order. This demonstrates that the Insurance Company acknowledged that the absence of a reference to the disease that the appellant’s deceased wife was afflicted with at the time of the policy’s purchase was irrelevant, as the death was the result of a distinct illness. There was no connection between the two. The insurance company is now prohibited from utilizing the same argument to deny the appellant’s insurance policy renewal for the period commencing on July 7, 2009.
