Case Note & Summary
The case involves an appeal by the Life Insurance Corporation of India (LIC) against an order of the National Consumer Disputes Redressal Commission (NCDRC) which had affirmed the decisions of the District Consumer Disputes Redressal Forum, Ambala, and the State Consumer Disputes Redressal Commission (SCDRC) allowing a mediclaim claim filed by the respondent, Manish Gupta. The respondent had obtained a Health Plus policy from LIC under the Non-Medical General (NMG) category on 25 June 2008, without undergoing a medical examination. The proposal form required disclosure of health details, including whether the proposer had suffered from cardiovascular disease. The respondent answered in the negative. On 4 August 2009, the respondent underwent Mitral Valve Replacement surgery at Fortis Hospital, Mohali, and submitted a claim. LIC repudiated the claim on 29 October 2009 on the ground that the respondent was suffering from a pre-existing condition, namely rheumatic heart disease since childhood, which was not disclosed. The District Forum allowed the complaint, directing LIC to pay Rs 2,21,990 with interest at 9% per annum from the date of repudiation, plus compensation and costs. The SCDRC and NCDRC affirmed this order. The NCDRC held that the treating doctor's note of 'known case of rheumatic heart disease since childhood' was not proved as having been based on information from the patient. The Supreme Court allowed LIC's appeal, setting aside the orders of the consumer fora. The Court held that the contract of insurance is based on utmost good faith, and the insured has a duty to disclose all material facts. The proposal form specifically asked about cardiovascular disease, and the respondent's declaration stated that the answers were true and complete. The discharge card from Fortis Hospital clearly recorded 'K/C/O RHEUMATIC HEART DISEASE SINCE CHILDHOOD' under past history, which was uncontroverted. The Court found that the consumer fora made a fundamental error in allowing the claim despite clear evidence of non-disclosure. The repudiation was valid under the policy's pre-existing condition exclusion and fraud clause. The complaint was dismissed, and no order as to costs was made.
Headnote
A) Insurance Law - Utmost Good Faith - Duty to Disclose Material Facts - The insured is under a solemn obligation to make a true and full disclosure of information specifically asked in the proposal form; the proposer cannot determine materiality. Non-disclosure of a known pre-existing condition (rheumatic heart disease since childhood) constitutes a valid ground for repudiation. (Paras 4-7) B) Insurance Law - Pre-existing Condition Exclusion - Definition and Application - The policy defined 'pre-existing condition' as any medical condition arising prior to coverage, whether treatment was sought or not. The discharge card recorded 'known case of rheumatic heart disease since childhood', which was not disclosed. The repudiation was justified under the policy exclusions. (Paras 2-3, 6-7) C) Consumer Law - Medical Insurance - Burden of Proof - In a non-medical general policy, the onus is on the insured to provide material particulars of health. The consumer fora erred in allowing the claim by disregarding documentary evidence of past history recorded by the hospital. The Supreme Court set aside the orders of the District Forum, SCDRC, and NCDRC. (Paras 4, 7-8)
Issue of Consideration
Whether the repudiation of a mediclaim policy on the ground of non-disclosure of a pre-existing condition (rheumatic heart disease) was valid, and whether the consumer fora erred in allowing the claim despite uncontroverted evidence of suppression.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned judgment and order dated 10 December 2018 of the NCDRC, and dismissed the complaint filed by the respondent. No order as to costs.
Law Points
- utmost good faith in insurance contracts
- duty to disclose material facts
- non-disclosure as fraud
- pre-existing condition exclusion
