Insurer must justify claim rejection medically

Insurance firms will not be permitted to assume a reason for an ailment according to own convenience, whims and fancies. If a reason is attributed, the onus would lie on the insurance company to medically prove the correctness of its contention

Can cirrhosis of the liver be attributed only to drinking? Or can cancer in a smoker be attributed solely to smoking? There might be several factors which could cause a particular ailment, and it is not possible to pin-point why the ailment occurred. Yet, insurance companies usually attribute a reason for an ailment which would make it convenient for them to reject the claim. The Maharashtra State Commission has recently held that jumping to such a presumption is incorrect.

Suresh Chunilal Jani and his wife Purnima were insured for Rs 2.75 lakh each, under a medi-claim policy issued by National Insurance Co. During the subsistence of the policy, Suresh was admitted to Hinduja Hospital for cirrhosis of the liver. The hospitalisation cost for 10 days came to Rs 92,912, while the medical expenses amounted to Rs 27,022, totalling Rs 1,19,934. He lodged a claim for reimbursement of these expenses, but his claim was rejected on the ground that the treatment was for "alcoholic liver disease as congenital external disease", not payable under the terms of the policy.

Suresh challenged the repudiation by filing a consumer complaint before the South Mumbai District Forum. The case was contested by the insurance company. The Forum held the repudiation was in order and dismissed the complaint. Suresh, appealed to the Maharashtra State Commission.

The Commission observed the insurance company's stand (repudiation on the ground of alcoholic liver disease) was not covered under Clause 4.8 of the policy. During the hearing, the Commission pointedly questioned the insurance company whether cirrhosis of the liver could be caused due to reasons other than consumption of alcohol. The insurance company's advocate sought an adjournment so that he could obtain the relevant medical literature. Yet, on the next date, the insurance company could not produce any material to justify the ground on which the claim had been repudiated.

The Commission noted Clause 4.8 dealt with convalescence, general debility, run-down condition, rest cure; congenital external disease or defects or anomalies; sterility, infertility, sub-fertility or assisted conception procedures; venereal disease; intentional self-injury, suicide; all psychiatric and psychosomatic disorders; and diseases or accidents due to misuse or abuse of drugs or alcohol or other intoxicating substances. The Commission noted the insurance company was not able to produce any material to show liver cirrhosis was due to alcohol alone or it was a congenital external disease. Hence, the provisions of Clause 4.8 were held to be inapplicable.

The Commission held the conclusion of the District Forum upholding the repudiation was incorrect. Holding that the repudiation of the claim was unjustified, the Commission set aside the District Forum's order and directed the insurance company to settle the claim.

Accordingly, the insurance company was ordered to pay the entire claim of Rs 1,19,934 within two months along with 9 per cent interest from March 19, 2008 when it was repudiated, till payment.

The judgement was delivered by Narendra Kawde for the bench of the State Commission along with S R Khanzode. This judgement will benefit consumers, as insurance companies will not be permitted to assume a reason for an ailment according to its own convenience, whims and fancies. If a reason is attributed, the onus would lie on the insurance company to medically prove the correctness of its contention.

The author is a consumer activist