Effect of non-disclosure

Accepting the Life Insurance Corporation of India's contention in the judgment of the case - Life Insurance Corporation of India v. Manish Gupta, a division bench of the Supreme Court consisting of Justice Dr. Dhananjaya Y. Chandrachud and Justice Hemant Gupta have upheld on April 15, 2019, that as the documentary material indicates that there was a clear failure on the part of the respondent by not disclosing that he had suffered from rheumatic heart disease since childhood, the appellant-LIC was on valid ground in repudiating the policy.

The LIC repudiated the policy on the ground of failure of the insured to disclose his past of history of cardiovascular disease. This ground for repudiation was in terms of the exclusions contained in the policy.

According to the Apex-Court, the consumer for a have made a fundamental error in allowing the claim for reimbursement of medical expenses in the face of the uncontroverted material on record.

The District Consumer Disputes Redressal Forum, Ambala, allowed a consumer complaint instituted by the respondent on the basis of a Mediclaim policy. The District Forum directed the appellant to pay a sum of Rs 2,21,990/- together with interest at the rate of 9 pc per annum from October 29,2009, which is the date on which the claim was repudiated. Compensation of Rs 10,000/- was awarded towards mental harassment and Rs 10,000/- towards litigation expenses.

Failing payment within the stipulated period, the amount awarded was directed to carry interest at 12 pc per annum. This order of the District Forum was affirmed in appeal by the State Consumer Disputes Redressal Commission (SCDRC). The National Commission (NCDRC) dismissed a revision filed by the appellant. This brought the parties to the Supreme Court.

The respondent obtained a Mediclaim policy from the appellant. On June 7, 2008, he had submitted a proposal form for a Health Plus policy. The policy was issued on June 25, 2008, under the category of 'Non-Medical General' for a sum of Rs 1,60,000/- .

The proposal form required a disclosure of health details and medical information. Among them was whether the proposer had suffered from 'cardiovascular disease e.g.: Palpitations, heart attack, stroke, chest pain'. The proposal form contained a response in the negative to this query.

The third party Administrator received a hospital claim form on August 7, 2009, submitted by the respondent, which was certified by a doctor at Fortis Hospital, Mohali on August 4, 2009 during which period he had undergone a Mitral Valve Replacement Surgery. The claim was repudiated by the appellant on October 29, 2009, on the ground that the respondent was suffering from a pre-existing illness.

The expression 'pre-existing condition' is defined in the exclusions under the policy in following terms:

'i. 'Pre-existing condition' - any medical condition or any related condition (e.g. illnesses, symptoms, treatments, surgery, pains) that have arisen at some points prior to the commencement of this coverage, irrespective of whether any medical treatment or advice was sought. Any such condition or related condition about which the Principal Insured or insured dependent know, knew or could reasonably been assumed to have known, will be deemed to be pre-existing.The following conditions will also be deemed to be 'Pre-existinhg':

'ii. Any sickness , illness, complication or ailment arising out of or connected to the pre-existing illness.'

The District Forum held in favour of the respondent. The NCDRC, while affirming the SCDRC, held that though the treating doctor had recorded, under the column of 'past history' that this was a known case of rheumatic heart disease since childhood, the doctor had not been examined in order to prove how the information had been recorded in his report.

According to the NCDRC, the notes of the doctor did not indicate that it had been recorded on the basis of the information furnished by the patient. In this view of the matter, the decision of the District Forum, as affirmed by the SCRDC, has not been interfered with.

According to the appellant's counsel, the Health-plus policy falls in the NMG category where the insured is not subjected to a medical examination before the issuance of a policy. Hence, it is a solemn obligation of the proposer to truthfully fill out the details required by the insurer in the proposal form on the basis of which the insurer takes a decision in regard to the issuance of the policy. Hence, it was urged that the onus was on the insured to provide material particulars of his health since no medical examination was mandated.

In the present case, it has been submitted that, ex facie, there was a breach on the part of the insured in suppressing information pertaining to the fact that he had been suffering from rheumatic heart disease since childhood. Hence, on this ground, the repudiation was sought to be justified.

Moreover, non-disclosure of any health event is specifically set out as a ground for excluding the liability of the insurer.

The declaration which was furnished by the proposer constituted basis for issuance of the policy. This was particularly so in a case such as the present where no medical examination has been held, for a policy under the NMG category.

The discharge card of the Department of Cardiovascular and Thoracic Surgery at Fortis Hospital specifically contains a resume of the history of the patient. The past history has been adverted to as a 'known case of rheumatic heart disease since childhood'. Apart from the fact that this information would be recorded on the basis of information divulged by the patient, this aspect of recording of the past history by Fortis Hospital was never in dispute.

The treatment record indicates that the respondent was operated for MVR. The nature of the diagnosis has been reflected as rheumatic heart disease. The hospital treatment form is along the same lines.

The Supreme Court has allowed the appeal, set aside the order passed by the NCDRC and declared that the respondent's complaint shall stand dismissed.