Partial Settlement Without Proving Disclosure Of Exclusions Amounts To Unfair Trade Practice: Chandigarh Consumer Commission
Pranav B Prem
The District Consumer Disputes Redressal Commission-II, Union Territory of Chandigarh, comprising President Amrinder Singh Sidhu and Member Brij Mohan Sharma, has held Star Health and Allied Insurance Company Limited guilty of deficiency in service and unfair trade practice for partially settling a medical insurance claim without establishing that the exclusion clauses relied upon were duly disclosed to and accepted by the insured.
The Commission observed that an insurer cannot seek the benefit of exclusion clauses unless it proves that such terms formed part of the contract and were properly communicated to the insured. In the absence of such proof, deductions made while settling a claim cannot be sustained in law.
The complaint was filed by Rama Kant Verma, who had obtained a Family Health Optima Insurance Policy from Star Health covering himself, his wife, and daughter. The policy was originally taken in July 2017 and renewed from time to time. For the policy period between July 25, 2021 and July 24, 2022, the complainant was covered for a base sum insured of ₹10 lakh along with additional benefits such as bonus and recharge facility.
During the subsistence of the policy, the complainant’s wife underwent bariatric surgery, which was certified by the treating doctor as medically necessary. She was admitted to Fortune Hospital, Kanpur, from July 9, 2022 to July 11, 2022, and medical expenses amounting to ₹2.25 lakh were incurred. The complainant submitted a reimbursement claim for the said amount. However, the insurer approved only ₹69,958 and deducted ₹1,55,042 under various heads by citing policy exclusions and limitations.
Aggrieved by the partial settlement, the complainant contended that the deductions were arbitrary and unjustified. He specifically alleged that the detailed terms and conditions of the policy, including exclusion clauses relied upon by the insurer, were never supplied, explained, or accepted by him. Despite seeking clarification from the insurer, no satisfactory response was received, compelling him to approach the Consumer Commission.
The insurance company, in its defence, claimed that the policy was issued only after the complainant had understood and accepted all terms, conditions, exclusions, and limitations. It was contended that the claim was assessed strictly in accordance with policy provisions and that the admissible liability worked out to ₹69,958, which had already been paid. The insurer denied any deficiency in service or unfair trade practice.
After examining the record, the Commission noted that while the insurer relied upon exclusion clauses to justify the deductions, there was no evidence to show that the detailed terms and conditions of the policy were ever signed, supplied, or expressly accepted by the complainant. The Commission observed that the insurer failed to point out any specific exclusion clause duly acknowledged by the insured that could justify the deductions made from the claim amount.
Placing reliance on the Supreme Court’s decision in Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., the Commission reiterated that exclusion clauses cannot be enforced unless they are clearly disclosed and form part of the contract accepted by the insured. The Commission further criticised the tendency of insurance companies to readily issue policies but raise technical objections at the stage of claim settlement, observing that such conduct defeats the very purpose of insurance.
The Commission held that the act of partially disbursing the claim without proper justification amounted to deficiency in service as well as unfair trade practice. It found that the insurer had failed to discharge its obligation of good faith by not proving disclosure of the exclusion clauses relied upon. Accordingly, the complaint was partly allowed. The insurer was directed to pay the remaining claim amount of ₹1,55,042 to the complainant along with interest at 9% per annum from the date of filing of the complaint till realisation. The Commission also directed the insurer to pay ₹20,000 towards compensation and litigation costs.
Cause Title: Rama Kant Verma v. Star Health and Allied Insurance Company Ltd.
Case No: DC/AB1/44/CC/406/2023
Coram: President Amrinder Singh Sidhu, Member Brij Mohan Sharma
