Case Note & Summary
The petitioners, account holders of Bank of Maharashtra, were covered under a group health insurance scheme called 'Mahabank Swasthya Yojna' provided by United India Insurance Company Limited. The scheme was governed by an agreement dated 18 May 2006 between the bank and the insurer. The petitioners had been continuously insured under the scheme for several years. When they sought renewal of their policies, the insurer refused renewal on the ground that they had pre-existing diseases. The petitioners challenged this refusal by filing writ petitions. The court examined the terms of the agreement, particularly Clause 4.1 which excluded pre-existing diseases at the time the cover incepts for the first time. The court held that the exclusion clause applies only at the inception of the first policy and not at the time of renewal. Since the petitioners had been continuously covered without any break, the insurer could not refuse renewal based on pre-existing diseases. The court also noted that the IRDA guidelines require insurers to renew health insurance policies without imposing fresh waiting periods for pre-existing diseases if the policy has been continuously renewed. The court allowed the petitions and directed the insurer to renew the policies.
Headnote
A) Insurance Law - Renewal of Health Insurance - Pre-existing Disease Exclusion - Insurer cannot refuse renewal of health insurance policy on ground of pre-existing disease where the policy has been continuously renewed without break and the insured has been covered under a group insurance scheme for several years - The court held that the exclusion clause for pre-existing diseases applies only at the inception of the first policy and not at the time of renewal, and that the insurer's refusal to renew was arbitrary and violative of the terms of the policy and IRDA guidelines (Paras 1-10).
Issue of Consideration
Whether an insurance company can refuse renewal of a health insurance policy on the ground of pre-existing disease when the policy has been continuously renewed without any break and the insured has been covered under a group insurance scheme for several years.
Final Decision
The court allowed the writ petitions and directed the insurer to renew the health insurance policies of the petitioners.
Law Points
- Renewal of health insurance policy cannot be denied on ground of pre-existing disease if policy has been continuously renewed without break
- Insurance Regulatory and Development Authority (IRDA) guidelines on portability and renewal
- Group insurance policy terms binding on insurer
- Principle of legitimate expectation in insurance contracts
