Oriental Insurance Held Accountable by Delhi State Commission for Denial of Legitimate Medical Claims
Pranav B Prem
In a significant ruling affirming consumer protection in the insurance sector, the Delhi State Consumer Disputes Redressal Commission has held that Oriental Insurance Company Ltd. acted in deficiency of service by repudiating valid medical insurance claims of an elderly policyholder on the basis of exclusion clauses that were never communicated to him. The Commission upheld the decision of the District Consumer Disputes Redressal Commission, North Delhi, which had directed the insurer to pay the unpaid medical claim amount along with compensation and interest.
The appeal was filed by Oriental Insurance Company challenging the District Commission’s order that had granted relief to the late Raghubir Saran Bansal, an 81-year-old insured individual who was hospitalized twice during the term of his health policy. The State Commission bench comprising Justice Sangita Dhingra Sehgal (President) and Mr. J.P. Agrawal (Member) dismissed the appeal, finding no merit in the insurer’s defence that the claims fell within policy exclusions.
The factual matrix revealed that Mr. Bansal had purchased a mediclaim policy covering himself and his wife for the period 25 May 2013 to 24 May 2014. During this period, he suffered from serious medical complications and was admitted to Sri Balaji Action Medical Institute in October 2013 with diagnoses of Septicemia and Hyponatremia (SIADH). Just days after discharge, he was readmitted to Jaipur Golden Hospital, where he was treated for Duodenal Mucosa Denudation, among other ailments. Combined, these hospitalizations resulted in medical bills totaling Rs. 2,77,284.
Initially, the insurer rejected both cashless treatment requests. Upon receiving reimbursement claims, the TPA of Oriental Insurance repudiated the first claim completely, citing Exclusion Clauses 4.1 and 4.2 of the policy. The second claim was partially allowed, and a sum of Rs. 92,814 was eventually disbursed, with no justification provided for the unpaid balance. Despite repeated follow-ups by the insured, the insurer did not release the remaining amount, prompting him to approach the District Commission.
The District Commission found that Oriental Insurance failed to supply the complete policy terms, including the crucial exclusion clauses, to the complainant at the time the policy was issued and renewed. The order held that the insurer’s reliance on uncommunicated terms to reject a legitimate claim amounted to deficiency in service, and accordingly directed payment of the balance Rs. 1,84,470 with interest at 6% per annum, in addition to Rs. 10,000 as compensation for harassment and mental agony.
In the appeal before the State Commission, Oriental Insurance argued that the claim had been rightly repudiated on the basis of exclusion clauses which barred claims arising from certain ailments unless the policy had run for two consecutive years. It further contended that Mr. Bansal’s condition stemmed from a pre-existing disease, and hence, fell within the policy's exclusions. The insurer also attempted to argue that the policyholder had not objected to the exclusion clauses at the time of issuance.
The Commission, however, was not persuaded. It referred to its earlier decision in Pradeep Kumar Garg v. National Insurance Co. Ltd. [First Appeal no. 482 of 2005], where it was held that pre-existing disease exclusion can only be invoked if the insured was hospitalized or operated upon for the same disease in close proximity to the date of policy issuance. In that case, it was further clarified that normal conditions like hypertension or occasional ailments are part of modern life and cannot automatically be treated as concealed pre-existing diseases unless the patient was under active treatment near the policy commencement date.
The judgment noted that Oriental Insurance had failed to place on record any evidence indicating that Mr. Bansal underwent a medical examination prior to issuance of the policy or that he was suffering from a disclosed chronic illness necessitating exclusion. More significantly, the Commission pointed out that no proof had been filed to show that the policy’s exclusion clauses were ever provided to the complainant. This omission, it held, was fatal to the insurer’s case.
Quoting the Supreme Court's decision in Bharat Watch Company v. National Insurance Co. Ltd. [(2019) 6 SCC 212], the Commission emphasized that when exclusionary clauses are not duly communicated to the insured, they cannot be enforced to defeat a claim. In that case, the apex court held that the burden lies on the insurer to prove that the terms of the contract—particularly exclusionary clauses—were brought to the insured’s notice at the time of inception. In the present case, the Commission found that Oriental Insurance had failed to discharge this burden.
It also observed that even partial settlement of the second claim weakened the insurer's case further. The Commission stated that had the exclusion clauses genuinely applied, no amount ought to have been paid. By settling a portion of the claim, the insurer tacitly admitted that the conditions invoked were not absolute bars to payment.
The State Commission, concurring with the District Commission, held: “Unless the insured is duly informed about the terms and conditions of the policy, the exclusion clauses of the policy cannot be made applicable... Returning to the facts of the present case, it is clear that the copy of the terms and conditions containing clauses was not supplied to the Respondent... Therefore, Exclusion clauses in the said policy are not applicable.”
Finding no error in the findings of the lower forum, the appeal was dismissed. The judgment also directed that any Fixed Deposit Receipts (FDRs) be released in favour of the legal representatives of Mr. Bansal, who passed away during the pendency of the litigation.
Appearance
For the Appellant: Mr. Brijesh Kumar Sharma & Mr. Siddharth Sulani, Advocates
For the Respondents: Mr. Amit Kumar Maihan, Advocate
Cause Title: M/s Oriental Insurance Co. Ltd. V. Mrs. Kaushalya Devi Bansal
Case No: First Appeal No. 608/2017
Coram: Hon’ble Justice Sangita Dhingra Sehgal [President], Hon’ble Mr. J.P. Agrawal [Member (General)]
[Read/Download order]
