Case Note & Summary
The petitioners, Mrs. Jaya Elizabeth Mathew and Mr. Preneesh Oommen, filed a writ petition under Articles 226 and 227 of the Constitution of India challenging an award dated 29.03.2021 passed by the Insurance Ombudsman for the State of Karnataka (Respondent No.1) and the repudiation letter dated 14.12.2020 issued by HDFC ERGO General Insurance Company Ltd. (Respondent No.2). The petitioners had taken a health insurance policy from Respondent No.2. Subsequently, they made a claim for reimbursement of medical expenses amounting to Rs.28,43,684/-. The insurer repudiated the claim on the ground that the petitioners had suppressed material facts regarding a pre-existing disease (diabetes) at the time of taking the policy. The petitioners then approached the Insurance Ombudsman, who upheld the repudiation. Aggrieved, the petitioners filed the present writ petition. The main legal issue was whether the Ombudsman was justified in upholding the repudiation and whether the insurer had discharged its burden of proving that the insured had knowledge of the pre-existing condition. The petitioners argued that there was no suppression and that the insurer failed to prove that the condition was pre-existing or that the insured had knowledge of it. The insurer contended that medical records showed treatment for diabetes prior to the policy, indicating non-disclosure. The court analyzed the provisions of Section 45 of the Insurance Act, 1938, which places the burden on the insurer to prove that the insured had knowledge of the pre-existing disease. The court found that the insurer had not produced sufficient evidence to show that the insured was aware of the diabetic condition at the time of policy inception. The medical records relied upon were not conclusive. The court held that the Ombudsman's award was perverse and based on no evidence, and therefore liable to be quashed. The court allowed the writ petition, quashed the Ombudsman's award and the repudiation letter, and directed the insurer to release the claim amount of Rs.28,43,684/- with appropriate interest.
Headnote
A) Insurance Law - Health Insurance - Repudiation of Claim - Section 45 of Insurance Act, 1938 - The court examined whether the Insurance Ombudsman erred in upholding the repudiation of a health insurance claim on the ground of non-disclosure of pre-existing disease. The court held that the burden of proving that the insured had knowledge of the pre-existing condition at the time of policy inception lies on the insurer, and mere existence of medical records prior to the policy does not automatically establish knowledge. The Ombudsman's award was quashed as it failed to consider this legal principle. (Paras 1-10) B) Insurance Law - Insurance Ombudsman - Scope of Powers - The court considered the scope of judicial review of an award passed by the Insurance Ombudsman under the Insurance Ombudsman Rules, 2017. It held that the Ombudsman's decision is subject to writ jurisdiction under Articles 226 and 227 of the Constitution of India, and the court can interfere if the decision is perverse or based on no evidence. (Paras 1-5) C) Insurance Law - Pre-existing Disease - Burden of Proof - The court reiterated that under Section 45 of the Insurance Act, 1938, the insurer must prove that the insured had knowledge of the pre-existing disease and that the non-disclosure was material. The court found that the insurer failed to discharge this burden, as the medical records relied upon did not conclusively show that the insured was aware of the condition. (Paras 6-10)
Issue of Consideration
Whether the Insurance Ombudsman was justified in upholding the repudiation of the insurance claim on the ground of non-disclosure of pre-existing disease, and whether the insurer had discharged its burden of proving that the insured had knowledge of the pre-existing condition at the time of taking the policy.
Final Decision
The writ petition is allowed. The award dated 29.03.2021 passed by the Insurance Ombudsman and the repudiation letter dated 14.12.2020 issued by the insurer are quashed. The insurer is directed to release the claim amount of Rs.28,43,684/- with appropriate interest.
Law Points
- Insurance Law
- Pre-existing disease
- Non-disclosure
- Repudiation
- Section 45 Insurance Act 1938
- Burden of proof
- Insurance Ombudsman
- Writ jurisdiction
