DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, KOZHIKODE

PRESENT: Sri. P.C. PAULACHEN, M.Com, LLB    : PRESIDENT

Smt. PRIYA.S, BAL, LLB, MBA (HRM) :  MEMBER

Friday the 28^th day of June 2024

CC.231/2020

Complainants

1. E.C. Nazar,

S/o. Late M.P.C. Aboo Haji,

‘M.P.C. House’, Koduvally,

Kozhikode – 673572

2.                P. Sara,

W/o. E.C. Nazar,

‘M.P.C. House’, Koduvally,

Kozhikode – 673572

(By Adv. Sri. V. Sreenath, Smt. Bindu. G.)

Opposite Party

M/s. Star Health and Allied Insurance Co. Ltd,

 1^st floor, Simax Tower,

 West Nadakkavu, Kozhikode – 11

( By Adv. Sri. L.S. Bhagaval Das)

ORDER

By Sri. P.C. PAULACHEN  – PRESIDENT

            This is a complaint filed under Section 35 of the Consumer Protection Act, 2019.

2.  The case of the complainant, in brief, is as follows:

The complainants who are husband and wife got themselves enrolled in the Family Health Optima Insurance Policy of the opposite party. The second complainant had undergone a surgery for total knee replacement (R) in the Aster Mims, Kotakkal. She was admitted on 26/04/2019 and surgery was on 25/06/2019. She was discharged from the hospital on 26/09/2019. The medical and treatment expenses amounted to Rs. 1,82,342/-. A claim was lodged with the opposite party for reimbursement of the expenses. But the opposite party has repudiated the claim on the ground that it was a pre-existing disease which the second complainant was suffering from and that the claim was a premature one. The claim was wrongly repudiated by the opposite party and thereby mental agony and monetary loss was caused to the complainants. The insurance coverage was for Rs. 6,75,000/- and annual premium paid was Rs. 27,515/-. The policy was in force from 08/03/2019 to 07/03/2020. The reason stated for repudiation of the claim is incorrect and is merely a ruse to avoid payment. There is deficiency of service and unfair trade practice on the part of the opposite party. Hence the complaint to direct the opposite party to pay a sum of Rs. 1,82,342/- with interest and compensation of Rs. 50,000/-.  

3. The opposite party has resisted the complaint by filing written version wherein they have denied all the allegations and claims made against them in the complaint. The first complainant had taken a Family Health Optima Insurance Policy covering himself and the second complainant on 03/03/2017 and the same has been renewed up to 07/03/2020 for  a sum insured of Rs. 5,00,000/-. At the time of availing the policy, the complainants were supplied with the terms and conditions of the policy and same were explained to them.
4. During the policy period from 08/03/2019 to 07/03/2020 the opposite party had received a request for cashless hospitalisation from Mims Hospital, Kotakkal stating that the second complainant was admitted in the hospital on 24/06/2019 and was provisionally diagnosed with Osteoarthritis Grade IV Right Knee and was planning for total knee replacement. The opposite party issued a query letter requesting the hospital to forward some information. The opposite party had initially approved Rs. 70,000/- and informed the hospital that the provisional approval given and the initial amount sanctioned were subject to review at any time.
5. Thereafter the hospital had forwarded the copy of the discharge summary, bills and other connected records for enhancement of the cashless amount. On a perusal of the records, it was seen that it is a case of pre-existing disease and it was not disclosed in the proposal form at the time of inception of the first policy. Hence the approval given earlier was withdrawn.
6. After discharge from the hospital the complainant had preferred the claim. It is noticed that the complainants by colluding with the treating doctor had corrected the history mentioned in the discharge summary as 8 months instead of 35 years in order to get the claim unlawfully. As per the policy the pre-existing disease is excluded under waiting period until 48 months of continuous coverage have elapsed last since inception of the first policy. There is no deficiency of service on the part of the opposite party. The repudiation was strictly based on the terms and conditions of the policy. The complainants are not entitled to the reliefs prayed for. With the above contentions, the opposite party prays for dismissal of the complaint with costs. 
7. The points that arise for determination in this complaint are;

1. Whether there was any deficiency of service or unfair trade practice on the part of the opposite party, as alleged?

2) Reliefs and costs.

8. No oral evidence was let in by the parties. Exts A1 to A4 were marked on the side of the complainant.
9. Heard.
10. Point No 1:   The complainants have approached this Commission with a grievance that the claim put in by them in connection with the treatment of the second complainant was repudiated by the opposite party without valid reason and thereby the opposite party has indulged in unfair trade practice and there was deficiency of service.
11. The documents produced by the complainants were marked as Exts. A1 to A4. Ext A1 is the copy of the tax invoice dated 08/03/2019, Ext A2 is the letter dated 10/02/2019 issued by the opposite party, Ext A3 is the discharge summary and the bill issued by Aster Mims Hospital and Ext A4 is the repudiation letter dated 28/09/2019.
12. There are some admitted facts in this case. That the first complainant has taken a Family Health Optima Insurance Policy of the opposite party covering himself and second complainant on 03/03/2017 and that the same has been renewed up to 07/03/2020 is admitted.  The second complainant was under treatment in the Aster Mims from 24/06/2019 to 29/06/2019. The final diagnosis was grade IV Osteoarthritis right knee and the secondary diagnosis was hypothyroidism. The procedure/surgery done was total knee replacement right. Ext A3 shows that the medical and treatment expenses amounted to Rs. 1,82,342/-. The complainants lodged a claim with the opposite party with all the relevant documents. But the claim was repudiated by the opposite party as per Ext A4. There is no serious dispute on the above aspects.
13. Ext A4 shows that the claim was repudiated on the ground that it is a pre-existing disease which was not disclosed in the proposal form and that the claim was a premature one as the company is not liable to make any payment in respect of expenses for treatment of the pre-existing disease until 48 months of continuous coverage has elapsed since the inception of the policy.
14. In this context, it is worthwhile to have a glance at Ext A3. It is clearly stated in Ext A3 dated 29/06/2019 that the second complainant is a known case of hypothyroidism presented with complaints of right knee pain for 8 months, aggrevated last 3 months.  So it is crystal clear that it is not a pre-existing disease so as to disclose the same in the proposal form at the time of inception of the first policy which admittedly was on 03/03/2017.
15. The opposite party has taken a contention in the written version that the second complainant had complaints of right knee pain for 35 years and it was corrected by colluding with the treating doctor in the discharge summary in order to make unlawful gain. But the said contention is not supported by any evidence. No evidence was let in by the opposite party. No document has been produced by the opposite party to show that the second complainant had complaints of right knee pain for 35 years. On the other hand, Ext A3 would prove that the complaints of right knee pain for the complainant was for 8 months only and aggrevated last 3 months. It is not a case pre-existing disease. That being the position, there is no justification for repudiating the claim on the ground of pre-existing disease which was not disclosed in the proposal form and that the claim is premature. Moreover, the terms and conditions of the policy which the opposite party relies on are not produced before this Commission.
16.  It is well settled that the contract of insurance is a contract uberimmae fidei and every material fact must be disclosed. In Modern Insulators Ltd. Vs. Oriental Insurance Co., Ltd. (200)2 Supreme Court Cases 734, the Hon’ble Supreme Court has held that the non-disclosure of the terms and conditions is violation of utmost good faith which is the base of insurance contract. In paragraph 8 of the aforesaid decision, it has been held as follows:

      “It is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since obligation of good faith applies to both equally”. 

17. The Hon’ble  Apex Court in 2021 (0) Supreme (SC) 779- (Manmohan  Nanda V/s United India Insurance Company Limited)  has observed as follows; (paragraph 52)

        “On a consideration of the aforesaid judgments, the  following principles would emerge:

       (!). There is a duty or obligation of disclosure by the insured regarding any material fact at the time of making the proposal.  What constitutes a material fact would depend upon the nature of the insurance policy to be taken, the  risk to be covered, as well as the queries that are raised in the proposal form.

     (!!). What may be a material fact in a case would also depend upon the health and medical condition of the proposer. 

    (!!!). If specific queries are made in a proposal form then it is expected that specific answers are given by the insured who is bound by the duty to disclose all material facts.

   (!!!!). If any query or column in a proposal form is left blank then the insurance company must ask the insured to fill it up. If in spite of any column being left blank, the insurance company accepts the premium and issues a policy, it cannot at a later stage, when a claim is made under the policy, say that there was a suppression or non-disclosure of a material fact, and seek to repudiate the claim.

     (v). The insurance company has the right to seek details regarding medical condition, if any, of the proposed by  getting the  proposer examined by  one of its empanelled doctors. If, on the consideration of the medical report, the insurance company is satisfied about the medical condition of the proposer and that there is no risk of pre-existing illness, and on such satisfaction it has issued the policy, it cannot thereafter, contend that there was a possible pre-existing illness or sickness which has led to the claim being made by the insured and for that reason repudiate the claim.

    (vi). The insurer must be able to assess the likely risks that may arise from the status of health and existing disease, if any, disclosed by the insured in the proposal form before issuing the insurance policy. Once the policy has been issued after assessing the medical condition of the insured, the insurer cannot repudiate the claim by citing an existing medical condition which was disclosed by the insured in the proposal form, which condition has  led to a particular risk in respect of which the claim has been made by the insured.

     (vii). In other words, a prudent insurer has  to gauge  the possible risk that the policy would have to cover and accordingly decide to either accept the proposal form and issue a policy or decline to do so. Such an exercise is dependent on the queries made in the proposal form and the answer to the said queries given by the proposer.”

18. In this context, it is worthwhile to have a glance at the decision of the   Hon’ble National Consumer Disputes Redressal Commission in Arum  Kumar vs. New India Assurance Company Ltd., reported in III (2017) (CPJ) 553 (NC) wherein it has been held as follows: “It is not denied that the complainant has been taking the insurance policy since the year 1997. It was the bound duty of the Insurance Company to have verified the information given in the proposal form by obtaining the suitable expert opinion. In case certain column in the proposal form were left blank, it was obligatory on the Insurance Company to ask him to fill the required information, before taking decision to issue the insurance policy. It is a matter of grave concern that the Insurance Companies. Whether in the public sector or the private sector, do not make any effort to examine the proposal properly or get the necessary verification done, at the time of issuing the policies in question. However, when the claims are filed, minute scrutiny starts at that stage and the claims are repudiated, even for minor lapses on the part of the proposer. In the present case, the discharge summary of Sitaram Bharatiya Hospital stated that the complainant had difficulty in walking for a long time and history of borderline hypertension, but not on any medication. The District Forum had rightly observed that non-disclosure of such conditions in the proposal form cannot be blown out of proportion, so as to disentitle the complainant from the claim amount from the Insurance Company. We have no reason to differ with the conclusion arrived at by the State Commission, because the conditions so mentioned in the report of the hospital, do not imply that the complainant was suffering from any serious disease. It is held, therefore, that the claim has been wrongly repudiated by the Insurance Company on the ground of non-disclosure of information about the health conditions in the proposal form.”
19. It may be noted that the proposal form, which is the basis of the contract of the insurance and which is in the custody of the opposite party is not produced before this Commission. This important document, which is the basis of the contention of the opposite party, is not produced to examine the questions in the proposal form relating to existing disease and what answers were given by the proposer/complainant.  The opposite party failed to show any evidence regarding the alleged pre-existing disease suffered by the complainant at the time of getting the policy. The opposite party failed to show any evidence that any medical test or examination was done before issuing the policy in question.
20. Further in 2021 ( 0 ) Supreme (SC) 779- (Manmohan  Nanda V/s United India Insurance Company Limited) referred to above, it has been held by the Hon’ble Apex Court in paragraph 69 that “The object of seeking a medi claim policy is to seek indemnification in respect of a sudden illness or sickness which is not expected or imminent and which may occur overseas. If the insured suffers a sudden sickness or ailment which is not expressly excluded under the policy, a duty is cast on the insurer to indemnify the appellant for the expenses incurred thereunder.”
21. The treatment undergone by the second complainant is not for a pre-existing disease and therefore the grounds stated by the opposite party for repudiation of the claim are not applicable. The claim was wrongly repudiated by the opposite party. The act of the opposite party in wrongly repudiating the claim and thereby denying the legitimate claim amounts to gross deficiency of service and unfair trade and business practice. The request made by the complainant for Rs. 1,84,342/- is to be honoured by the opposite party as the treatment was during the policy period and the claim is within the limits of sum insured and the claim is strictly on the basis of the terms and conditions of the policy. Undoubtedly, the act of the opposite party has caused mental agony and inconvenience to the complainants, for which, they are entitled to be compensated adequately. The claim for compensation is Rs. 50,000/-. The claim appears to be excessive. However, they are entitled to get a reasonable amount as compensation. Considering the entire facts and circumstances, we are of the view that a sum of Rs. 10,000/- will be reasonable compensation in this case. The complaints are also entitled to get Rs, 5,000/- as cost of the proceedings.        
22. Point No. 2:- In the light of the finding on the above point, the complaint is disposed of as follows;

a)  CC.231/2020 is allowed in part.

b) The opposite party is hereby directed to pay the complainants a sum of Rs. 1,82,342/- (Rupees one lakh eighty two thousand three hundred and forty two only) with interest @ 9% per annum  from the date of the complaint ie, 04/11/2020 till actual payment.

c) The opposite party is directed to pay a sum of Rs. 10,000/- (Rupees ten thousand only) to the complainants as compensation for the mental agony and inconvenience suffered.

d) The opposite party is directed to pay a sum of Rs. 5,000/- (Rupees five thousand only) as cost of the proceedings to the complainants.

d) The order shall be complied with within 30 days of the receipt of copy of this order.      

Pronounced in open Commission on this, the 28^th day of June, 2024.

Date of Filing: 04/11/2020

   Sd/-                                                                                                 Sd/-

                 PRESIDENT                                                                                   MEMBER                                      

APPENDIX

Exhibits for the Complainant :

Ext.A1 – Copy of the tax invoice dated 08/03/2019.

Ext.A2 – Letter dated 10/02/2019 issued by the opposite party.

Ext.A3 – Discharge summary and the bill issued by Aster Mims Hospital.

Ext.A4 – Repudiation letter dated 28/09/2019. 

Exhibits for the Opposite Party

Nil.

                        Sd/-                                                                                         Sd/-

                 PRESIDENT                                                                                   MEMBER                                      

                                 True Copy,      

                                                                                                                                Sd/-

                                                                                                                      Assistant Registrar.