Insurer cannot override a doctor's clinical judgment to reject claim

Star Health must reimburse Covid hospitalisation costs after the court rejects the claim denial

A recent tribunal judgment on a petition filed by a UP resident highlighted how technical objections can derail legitimate claims. 

In January 2022, Ajay Nagar, who had Star Health family floater since 2018, developed high fever and breathing difficulty. He was admitted to a private hospital, and the family informed the insurer immediately, expecting cashless approval.

 

After discharge, Star Health rejected the claim, arguing that the symptoms were “mild” and treatment should have taken place under home isolation. With no response to her legal notice, his wife Nitu Nagar approached the district consumer commission.

 

Last month, the commission held that an insurer cannot override a treating doctor’s judgement and ordered Star Health to reimburse nearly ~50,000 with interest.

 

The case underscores the ongoing friction between policy wording, medical judgement, and insurer discretion.

 

What ‘medically necessary hospitalisation’ actually means

Siddharth Singhal, head of health insurance at Policybazaar, says that medical necessity is based on a doctor’s assessment,

 

not the insurer’s interpretation of symptom severity.

 

“Even if symptoms appear mild, hospitalisation is valid if tests or vitals show risk and the doctor justifies admission,” he says.

 

Prerna Robin, principal associate at B Shanker Advocates LLP, notes that IRDAI’s standardised definition requires admission to be prescribed by a qualified medical practitioner and aligned with accepted clinical standards.

 

She emphasises that these regulatory benchmarks “prevent insurers from narrowing coverage through their own post-hoc criteria”, particularly in cases like Covid where conditions may escalate quickly.

 

Steps that reduce the risk of claim rejection

Singhal advises early intimation to the insurer, accurate pre-authorisation forms, and ensuring that the doctor clearly documents clinical rationale for admission.

 

At discharge, he says, policyholders must collect all reports and insist that the summary “accurately records diagnosis, treatment and reason for hospitalisation”.

 

Robin adds that the discharge summary acts as a quasi-legal document and must avoid inconsistencies that insurers later cite, such as misstated timelines or vague references to pre-existing conditions. She also stresses maintaining original invoices, lab reports, and signed documents, as missing paperwork is a common ground for rejection.

 

Can an insurer insist on home isolation?

According to Himesh Thakur, associate partner at PSL Advocates & Solicitors, an insurer cannot replace a doctor’s clinical judgment with its own administrative reasoning. He points out that IRDAI’s definition of medically necessary treatment, consumer forum rulings, and Supreme Court jurisprudence require insurers to rely on medical evidence, not hindsight opinions that the condition “could have been managed at home”. Ambiguities in policy wording are interpreted in favour of the insured.

 

What remedies are available when a claim is rejected?

Rohit Jain, managing partner at Singhania & Co, outlines the general escalation ladder: Internal grievance redressal, followed by the Insurance Ombudsman or IRDAI via the Bima Bharosa (formerly IGMS) platform, and finally the consumer forum or civil court. This sequence, he says, ensures that “policyholders exhaust lower-cost and faster statutory remedies before approaching adjudicatory forums”.

 

Singhal adds that consumers should escalate to IGMS if an insurer does not respond or provides an unreasoned rejection. Thakur notes that unexplained delays or template-based refusals themselves amount to “deficiency in service” under consumer law.

 

Robin highlights that the Ombudsman offers a cost-free, binding remedy up to ~50 lakh, while consumer commissions can award compensation for harassment and litigation costs.

 

The Noida ruling reinforces a clear principle, when a doctor determines that hospitalisation is necessary, insurers cannot rely on retrospective administrative interpretations to deny a valid claim.