Table of Contents
Introduction
An important financial cushion against medical expenses is offered by health insurance claims, particularly those that fall under Mediclaim policies. Not disclosing pre-existing conditions, however, when purchasing a policy, has been pointed out as one of the most contentious issues in the realm of insurance law. A significant amount of conflict has been seen in cases of disallowance of claims for failure to disclose pre-existing conditions.
“Any sickness, illness, injury, or disease that has been diagnosed by a doctor within 48 months from the date of this policy’s effective date, or for which medical advice or treatment has been advised or received, within 48 months from the date of commencement of this policy, will be classified as a Pre-existing Disease.” The Insurance Act of 1938, Insurance Regulatory and Development Authority Rules, and Consumer Protection Act of 2019 are laws which form a regulatory mechanism for denial of Mediclaim policies on grounds of PED misrepresentation. There have been many conflicts that arose from denial of claims many years after purchase of the policy, mostly in situations that were critical in a medical emergency, for lack of information related to common ailments like Diabetes, Hypertension, Thyroid, and Cardiovascular issues.
Understanding the Role of Insurance Contracts
In a mediclaim insurance policy, the insured and the insurer enter into a contract of utmost good faith, wherein the policyholder agrees to pay premiums for getting covered against some medical expenses. The Insurance Act, 1938, particularly Sections 45 and 64VB, regulates disclosure requirements and circumstances in which insurers can repudiate claims on account of non-disclosure or misrepresentation on material facts.
The contract of insurance is based on the very basic premise that the proposer shall disclose all the information that may come to his knowledge, which may affect the decision of the insurer to accept the risk or the quantum of premium. Material facts concerning the health and medical history, lifestyle habits, and family medical history of the proposer are those that would influence the assessment of the risk.
There are various jurisdictions that deal with insurance disputes about claim denials:
- Consumer Forums: At the District, State, or National levels, customers can seek redress with the Consumer Disputes Redressal Commissions for their claims of value under the Consumer Protection Act of 2019.
- Insurance Ombudsman: The Insurance Ombudsman scheme provides an alternative dispute resolution methodology for claims up to Rs. 50 lakhs (now proposed to be increased).
- Civil Courts: The civil courts take cognizance of cases either not falling within the scope of the Ombudsman or involving complex legal issues. 4. IRDAI: Besides regulatory compliance, the Insurance Regulatory and Development Authority of India has powers to impose penalties on insurers for conducting business in an unfair manner. The authority to adjudicate mediclaim disputes draws from the guiding principle that insurance contracts are governed by both contract law principles and specific insurance regulations designed for protection against arbitrary denial of valid claims on the part of policyholders.
The Concept of Pre-Existing Disease
Pre-existing conditions are described as “any condition, ailment, injury, or related condition for which the insured person had symptoms, was diagnosed, and/or received medical advice/treatment within 48 months preceding the original policy issued by the insurer,” as per the IRDA (Health Insurance) Regulations of 2016, and as further updated.
To avoid any confusion and promote transparency, it has been a requirement under IRDA that every healthcare insurance policy must define PED in their policies. The same definition must be followed in the industry.
Types of Pre-existing Diseases
There are a variety of general types of pre-existing conditions, which fall into several broad groups
- Declared Pre-Existing Diseases: These are conditions that are disclosed in a proposal and may be accepted with or without waiting periods, loadings, and exclusions by an insurer.
- Undeclared Pre-existing Ailments: These are conditions that already exist but are not disclosed by the proposer. These, when discovered in the course of processing a claim, could lead to a rejection of that claim.
- Known Pre-Existing Diseases: These are conditions known to the proposer either as a result of a diagnosed condition, symptoms, or medical advice. 4. Unknown Pre-existing Diseases: These are diseases that exist in the proposal initiator but are unknown to him. Diabetes, hypertension, thyroid problems, asthma, heart-related issues, arthritis, kidney problems, and psychological issues are some common pre-existing illnesses. The reveal of these conditions has major implications in underwriting.
Understanding the Role of Insurance Contracts
A policy of the highest good faith between the insured and the insurer is referred to as a mediclaim policy. The obligation of disclosure, as well as claim repudiation in cases of misrepresentation or lack of disclosure, is as per the Insurance Act of 1938, under sections 45 and 64VB. The essence of this tenet is that a person proposing a policy ought to make known any matter that would influence the person’s decision to assume a risk as well as in determining a premium.
The dispute resolution in insurances involves various agencies, such as IRDAI for regulatory compliance, Consumer Forums depending upon the value of the claim, Insurance Ombudsmen for claims amounting to Rs. 50 lakhs, and Civil Courts for amount exceeding that. The executing authorities are empowered to impose a fine, attach properties, or enforce payment upon being allowed.
Finality of Decrees
“The incontestability clause in Section 45 of Insurance Act 1938, as amended in 2015, offers the most significant protection. Insurers cannot cancel contracts of insurance on the basis of fraud, misrepresentation, or nondisclosure for a period of three years from the date of commencement of the policy or revival of the policy. Insurers cannot deny claims unless they can prove fraud with intent. This change reduced the insurers’ ability to deny claims on a technicality and significantly enhanced consumer protection.”
Some key concepts are key to the whole legal arena. Both must conduct themselves with absolute honesty in Uberrimae Fidei. Caveat Emptor operates in a different manner, with insurers obligated to ask direct questions, for which the insured must provide candid answers concerning important issues. Ambiguities are to be construed against insurers, per Contra Proferentem. Remedies should be proportionate in order to avoid conflict; it would do no good to disallow total claims for minuscule, unrelated misrepresentation.
Fraud, as a defense, cannot be established after three years without proof of misrepresentation, knowledge of misrepresentation, intent to deceive, reliance, and actual damages. Misrepresentation of information without fraudulent purpose has been deemed misrepresentation, and as such, a valid defense of voidability after three years cannot be sustained unless it falls under fraud. A lack of knowledge of the rules and their import, when genuinely found in proposers, is labeled as innocent non-disclosure. A lack of symptoms, limited medical knowledge, ambiguous forms, and issues discovered in separate care will be sufficiently condoned by courts.
Limits of Insurer’s Powers
Section 45 imposes a limitation on the rejection of claims by insurers in three years, except in cases of proof of fraud, in which case the proof of liability rests with the insurers. The standardized definition of PED, standardized waiting periods of 2-4 years, standardized grievance form, calculation of ratios for claim settlements, and grievance form are some ways in which IRDA guidelines limit discretion. Further, the Consumer Protection Act lists “services” as a part of “goods.” “Arbitrary rejection of a claim would be a deficiency in those services.”
Some consider important cases for consideration in determining policy interpretation to be those involving Materiality and Causation, Waiver and Estoppel, as well as Reasonable Expectations. These cases, respectively, provide that conditions not disclosed are deemed material with a causal relationship between conditions and sickness.
Judicial Interpretations and Key Cases
United India Insurance Co. Ltd. v. M.K. J. Corporation[1]: The Supreme Court established that the burden of proving non-disclosure or misrepresentation lies on the insurer, and such proof must be clear and unambiguous. The Court emphasized that insurance contracts should be interpreted liberally in favor of the insured, especially when ambiguities exist. This case laid the foundation for protecting policyholders from arbitrary claim denials based on technical grounds.
Oriental Insurance Co. Ltd. v. Sony Cheriyan[2]: In this case, the proposer had answered questions in the proposal form, but the insurer later claimed non-disclosure of specific medical conditions. The Supreme Court held that when a proposal form contains vague or general questions, the proposer cannot be held liable for not disclosing specific conditions that were not clearly inquired about. The Court emphasized that insurers have a duty to ask precise questions if they require specific information. If the proposal form fails to specifically inquire about particular conditions, silence on those matters cannot constitute actionable non-disclosure.
National Insurance Co. Ltd. v. Hindustan Safety Glass Works Ltd.[3]: The Delhi High Court emphasized that the three-year incontestability period under Section 45 is absolute and sacrosanct. After this period, only proven fraud—not mere non-disclosure or misrepresentation—can be a ground for repudiation. The Court clarified that fraud requires deliberate intent to deceive and must be established through clear and convincing evidence, not mere suspicion or assumptions about the proposer’s knowledge.
Rajendra Kumar Bajaj v. Care Health Insurance Ltd. (NCDRC, 2024)[4]: In this recent landmark judgment, a senior citizen complainant had purchased an international medical health insurance policy from Care Health Insurance, paying a premium of Rs. 17,864. While traveling in Australia, the complainant experienced chest pain and underwent diagnostic tests followed by a stent procedure. Subsequently, he required further treatment including another stent placement. The hospital bills totaled 31,499 Australian Dollars. The insurer rejected both the cashless benefits and subsequent reimbursement claim, citing non-disclosure of pre-existing conditions—specifically Coronary Artery Disease (CAD) and Dyslipidemia.
The NCDRC, presided by Justice Inder Jit Singh, held that the insurer has a duty to seek complete details about the insured’s medical condition and assess risks before issuing the insurance policy. The Commission observed that although the complainant had failed to complete certain columns regarding diseases in the insurance proposal form, he had disclosed having high blood pressure for the past five years. Despite this disclosure of a pre-existing condition, the insurer issued the policy after receiving the premium without conducting any medical examination or seeking clarification on the blank columns.
The Commission emphasized that the insurer could have and should have requested the complainant to fill in any blank columns, especially considering he had declared having a pre-existing disease (hypertension). Given the complainant’s age (senior citizen), history of blood pressure, and the nature of the policy (international travel insurance), the insurer should have opted for a medical examination before issuing the policy. The Commission ruled that if the insurer issues a policy despite blanks in the form and after the insured has disclosed existing medical conditions, the insurer cannot later repudiate the claim citing non-disclosure or suppression. This constitutes deficiency in service under consumer protection law. The insurer was directed to pay the entire claim amount with interest at 9% per annum along with compensation for mental agony.
LIC of India v. Mamta Sipani (NCDRC, 2022)[5]: This case involved concealment of a fatal pre-existing disease. The deceased insured had obtained a life insurance policy but failed to disclose a serious medical condition. Upon death, LIC repudiated the claim on grounds of material non-disclosure. The District Commission initially ruled in favor of the nominee, holding that LIC had not proven fraud. However, the NCDRC, in its revisional jurisdiction, examined the medical records which clearly demonstrated that the deceased was suffering from a severe pre-existing medical condition that was not disclosed to the insurer.
The Commission upheld the principle that a contract of insurance is a testament to the highest degree of good faith, and the proposer of a life insurance policy is obligated to disclose all relevant information that could influence the insurer’s decision to incur the risk. The proposal form necessitates specific disclosure of pre-existing conditions to facilitate the insurer’s ability to make an informed decision based on actuarial risk. The NCDRC held that where medical records obtained during investigation clearly demonstrate undisclosed pre-existing fatal conditions, and the proposer had received treatment for these conditions shortly before applying for insurance, such non-disclosure constitutes breach of utmost good faith. The Commission upheld the repudiation of the claim, emphasizing that concealment of fatal pre-existing diseases at the time of taking insurance amounts to material misrepresentation that vitiates the contract
Nuances and Practical Considerations
The most common denial is the inability to reveal hypertension or diabetes. Hari Om Agarwal v. Oriental Insurance Co. Ltd. (Delhi High Court, 2007)[6] initiated the setting of important guidelines in the lifestyle disorders. The petitioner, a chartered accountant, purchased the Mediclaim insurance in May 2001 and was completely reporting about his diabetes and hypertension. The insurance asked him to have an ECG and once the premiums were taken, the coverage was granted. The policy was launched in five consecutive years of no-claim bonuses. Including the conditions of exclusion, the insurer denied him reimbursement at the time when he required medical assistance and claimed due to pre-existing diseases (diabetes, hypertension, and cataract).
It is no secret, says the Delhi High Court, that diabetes and hypertension may result in a host of diseases like stroke, heart disease, renal failure, liver problems, among others, and that all this depends upon a range of various factors. These diseases may be experienced by persons who are not either diabetic or hypertensive. The Court observed that he insurer had accepted the disclosures, medical testing was carried out, the policy was issued, and it was renewed at least during the years for which the premiums were paid; the placement of exclusion clauses with textual effect would bring an insulation of the Mediclaim coverage to a naught. The Court held that the impugned decision was arbitrary and unreasonable and directed the insurance company to pay the claim, for which consistent view has been taken by the Consumer Commissions such as NCDRC, which has held that claims under the insurance policy cannot be refused on the grounds of common lifestyle diseases when duly disclosed.
This is because most people are likely to be declined because most of the insurers would have known about the discussions held prior to the purchase of the insurance policy. This would mean that the insurance firms would need to prove the concern for the material issues and not the routine tests they wanted to consult. This is because the proposed forms for insurance would be the tests for the treatment or even hospitalization in the proposed changes made for the insurance company. The routine tests would therefore not need to be declared at the initial stage because courts would believe the insurance firms had waived the claims denial when they received the policies without exclusions following the tests in the case precedent of Hari Om Agarwal involving an ECG test prior to the insurance purchase.
Developmental issues such as arthritis, kidney failure require scientific facts regarding the time they occurred. Others are asymptomatic during their early stages, and it cannot be assumed that a person will point out any disabilities in which they lacked a reasonable suspicion.
In the case of Neelam Chopra v. LIC of India (2018)[7], the NCDRC has taken the view that the suppression of the fact that the person suffers from lifestyle diseases such as diabetes would not necessarily make the aggrieved person entirely not entitled to the claim if the disease has not caused the death or in any way has absolutely nothing to do with the actual reason for the death. The Commission agreed that suppression could lead to the proportionate reduction of the claim rather than complete nullification despite the fact that the claim could not be denied due to the common lifestyle factors.
The complexity of medical information and use of a representative who may instruct one not to disclose is only some of the difficulties that insureds may encounter. Application forms should be reviewed cautiously by the policyholders, while they should keep complete documentation of their medical records and properly report all known risks to be insured. The insurance companies should analyze while giving the insurance, and not while giving the claim, keep things simple with proper questions, do extensive background checks before giving the insurance, and use solutions like rate adjustments.
Conclusion
The law balances contractual principles of utmost good faith with consumer protection. Key principles include Section 45 protection (only proven fraud justifies repudiation after three years), burden of proof on insurers, good faith obligations on both parties, proportionality in remedies, and consumer protection treating unjustified denials as deficiency in service.
Many denials are successfully challenged when the three-year period elapsed, conditions were asymptomatic, proposal questions were vague, insurers failed adequate pre-policy examination, no causal connection exists, or insurers accepted premiums for years without investigation. The evolving regulatory landscape increasingly favors policyholders, recognizing health insurance’s critical social function and that technical grounds shouldn’t defeat legitimate claims. The legal framework acknowledges that health insurance provides financial protection during medical emergencies, and this fundamental purpose shouldn’t be defeated by overly technical interpretations or disproportionate denials for conditions policyholders were genuinely unaware of.
This article is authored by Ms. Moubeethi Chakraborty, student at Christ Academy Institute of law Bengaluru.
[1] 1996 (6) SCC 428
[2] 1999 (6) SCC 451
[3] 2017 (5) SCC 776
[4] DC/85/CC/22/159
[5] 2022 SCC OnLine NCDRC 41.
[6] (2009) 1 SCC (Review) 891 (SCC Online Blog)
[7] (2018) 10 NCDRC CK 0024
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