Insurer can't refuse claim by citing existing medical condition once policy issued: Supreme Court

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An insurer cannot repudiate a claim by citing an existing medical condition that was disclosed by the insured in the proposal form, once the policy has been issued, the Supreme Court has said. A bench of justices D Y Chandrachud and B V Nagarathna also said a proposer is under a duty to disclose to the insurer all material facts within his knowledge. The proposer is presumed to know all the facts and circumstances concerning the proposed insurance, it added.

While the proposer can only disclose what is known to him, the proposer's duty of disclosure is not confined to his actual knowledge, it also extends to those material facts which, in the ordinary course of business, he ought to know, the court said.

"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 and which condition has led to a particular risk in respect of which the claim has been made by the insured," the bench said in a recent judgment.

The top court was hearing an appeal filed by Manmohan Nanda against an order of the National Consumer Disputes Redressal Commission (NCDRC), rejecting his plea seeking a claim for medical expenses incurred in the United States.

Nanda had bought an Overseas Mediclaim Business and Holiday Policy as he intended to travel to the US. On reaching the San Francisco airport, he suffered a heart attack and was admitted to a hospital, where angioplasty was performed on him and three stents were inserted to remove the blockage from the heart vessels.

Subsequently, the appellant claimed the treatment expenses from the insurer, which was repudiated by the latter stating that the appellant had a history of hyperlipidaemia and diabetes, which was not disclosed while buying the insurance policy.

The NCDRC had concluded that since the complainant had been under statin medication, which was not disclosed while buying the mediclaim policy, he failed to comply with his duty to make a complete disclosure of his health conditions.

The apex court said the repudiation of the policy by the United India Insurance company was illegal and not in accordance with law. It said the object of buying a mediclaim policy is to seek indemnification in respect of a sudden illness or sickness that is not expected or imminent and that 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," the bench said.