Summary
The Court held that repudiation of an overseas mediclaim claim following a heart attack was unlawful. The insured had disclosed diabetes and supplied medical test reports before the insurer accepted the risk. Taking statins did not establish that he knowingly concealed a cardiac ailment or hyperlipidaemia. The insurer could not rely on an unanswered proposal question after accepting the proposal without clarification. It was directed to indemnify the medical expenses with interest and litigation costs.
Issues
- Whether the insured suppressed a material pre-existing ailment when obtaining overseas mediclaim cover.
- Whether the insurer could invoke the pre-existing-condition exclusion after accepting disclosed diabetes and medical test reports.
Provisions considered
- Regulation 2(d) and Explanation, Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002Material information comprises information important, essential and relevant to underwriting the risk; materiality depends on the insurance and circumstances. (¶ 33)
Held
- Utmost good faith imposes reciprocal disclosure duties. The proposer must disclose material facts known or reasonably expected to be known; materiality is assessed when disclosure is due, rather than from subsequent events. (¶¶ 30, 34, 36, 39, 40, 41)
- Specific proposal questions require specific answers. Where a column is left blank, the insurer must seek its completion; accepting the premium and issuing the policy without clarification precludes later repudiation on that omission. (¶ 52)
- The insured disclosed diabetes, underwent the required tests and obtained normal results before the insurer issued cover. Statin medication was precautionary on the evidence and did not prove a knowingly concealed cardiac ailment or hyperlipidaemia. No material suppression was established. (¶¶ 60, 64, 65, 66, 67)
- The pre-existing-condition exclusion could not justify repudiation in these circumstances. The Court construed it against the insurer, which had accepted the disclosed medical condition and its associated risks. The rule against the drafter resolves genuine ambiguity and does not create it. (¶¶ 44, 45, 47, 68, 69, 70)
- Medical expenses were to be indemnified within one month after receipt of the judgment, with six per cent annual interest from filing the Commission claim until realisation. Dollar expenses were to be converted at the filing-date exchange rate or Rs.45 per dollar, whichever was lower; litigation costs of Rs.1 lakh were also awarded. (¶ 71)
Result
Appeal allowed; dismissal of the consumer complaint set aside. Respondents directed to indemnify the medical expenses on the prescribed conversion basis, with 6% annual interest and Rs.1 lakh litigation costs.