Arbitrary Health Insurance Claim Deductions Amount to Deficiency in Service, Rules Chandigarh Consumer Commission Against Star Health
Pranav B Prem
The District Consumer Disputes Redressal Commission-II, U.T. Chandigarh, comprising President Amrinder Singh Sidhu and Member B.M. Sharma, has partly allowed a consumer complaint filed by Rama Kant Verma against Star Health & Allied Insurance Company Limited, holding the insurer guilty of deficiency in service and unfair trade practice for making arbitrary deductions while settling a health insurance claim without establishing that the policy exclusions relied upon had been duly disclosed to or accepted by the insured.
The complainant had obtained a Family Health Optima Insurance Plan from Star Health in 2017, which was subsequently renewed for the period from 25 July 2021 to 24 July 2022 after payment of the requisite premium. The policy covered the complainant, his wife Seema Verma, and their daughter Taniya Verma, with a sum insured of ₹10 lakh along with cumulative bonus and recharge benefits. During the policy period, Seema Verma underwent bariatric surgery at Fortune Hospital, Kanpur, and remained admitted from 09 July 2022 to 11 July 2022. The total medical expenditure incurred for the treatment amounted to ₹2,25,000, for which a claim was submitted to the insurer.
Upon processing the claim, Star Health approved only ₹69,958 and deducted an amount of ₹1,55,042, stating that several expenses claimed by the complainant fell under excluded or non-payable items as per the policy. The complainant contended that the insurer failed to justify the deductions or cite specific policy clauses supporting such disallowance. He further asserted that the detailed terms, conditions, and exclusion clauses of the policy were never supplied, explained, or signed by him, and that he had never expressly accepted the exclusions relied upon to reduce the claim. Despite addressing written communication to the insurer seeking clarification regarding the deductions, no response was received. Alleging arbitrary deductions, deficiency in service, unfair trade practice, and financial harassment, the complainant approached the Consumer Commission seeking payment of the deducted amount along with interest, compensation, and litigation costs.
Star Health contested the complaint by asserting that the complainant had obtained the policy after understanding all its terms, conditions, and exclusions, and that the deductions were made strictly in accordance with the policy provisions. The insurer stated that expenses relating to implants, consumables, ECG electrodes, miscellaneous charges, and other items were expressly excluded under the policy and, therefore, non-payable. It was contended that the approved amount of ₹69,958 represented the maximum admissible reimbursement under the policy and that there was no deficiency in service.
After examining the pleadings, evidence, and documents on record, the Commission noted that although the insurer claimed that deductions were made as per policy exclusions, no evidence was produced to show that the complainant had ever been provided with, explained, or had agreed to the detailed terms and exclusion clauses of the policy. The Commission observed that no signed document was placed on record to establish that the complainant had accepted the exclusions relied upon to deny the substantial portion of the claim. The insurer was also found to have failed to refer to any specific policy clause justifying the deduction of ₹1,55,042 from the total hospital bill.
Relying on the Supreme Court judgment in Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., the Commission reiterated that the principle of utmost good faith applies equally to insurers, and that an insurer cannot take advantage of exclusion clauses that were neither disclosed nor made part of the insurance contract. The Commission also relied on Dharmendra Goel v. Oriental Insurance Co. Ltd., wherein the Supreme Court deprecated the “take it or leave it” attitude of insurance companies and observed that insurers often focus on collecting premiums but resort to technicalities to deny legitimate claims.
The Commission strongly criticised the conduct of Star Health, observing that insurance companies frequently display a tendency to highlight benefits at the time of selling policies but invent excuses to repudiate or reduce claims when the insured seeks indemnification. It concluded that the partial settlement of a genuine claim without proving disclosure and acceptance of exclusion clauses was not only arbitrary but also amounted to deficiency in service and unfair trade practice.
Accordingly, the Commission partly allowed the complaint and directed Star Health & Allied Insurance Company Limited to pay the deducted amount of ₹1,55,042 to the complainant along with interest at 9% per annum from 09 August 2023, the date of filing of the complaint, until realisation. The insurer was further directed to pay ₹20,000 as compensation and litigation expenses. The Commission ordered that the directions be complied with within 45 days from receipt of the certified copy of the order.
Cause Title: Rama Kant Verma Vs. Star Health And Allied Insurance Company Limited
Case No: Consumer Complaint No. DC/AB1/44/CC/406/2023
Coram: President Amrinder Singh Sidhu, Member B.M. Sharma
