NATIONAL INSURANCE CO. LTD. vs SHYAM BABU, & ORS.

By this Revision Petition, under Section 21(b) of the Consumer Protection Act, 1986 (for short "the Act"), National Insurance Company Ltd. (for short "the Insurance Company"), Opposite Party No.2 in the Complaint under the Act, calls in question the correctness and legality of the order dated 27.08.2009, passed by the State Consumer Disputes Redressal Commission, Delhi at New Delhi (for short "the State Commission") in First Appeal No. 277 of 2009. By the impugned order, the State Commission has dismissed the Appeal in limine.

The Appeal had been filed by the Insurance Company against the order dated 03.02.2009, passed by the District Consumer Disputes Redressal Forum, New Delhi (for short "the District Forum") in Complaint Case No.OC/1955/05, preferred by Respondents No. 1 and 2 herein. By the said order, while allowing the Complaint, alleging deficiency in service on the part of the Insurance Company in repudiating their claim under the Mediclaim policy, the District Forum had directed the Insurance Company to reimburse to the Complainants a sum of 2,20,000/- and also pay a sum of 5,00,000/- as compensation on account of deficiency in service and 10,000/- towards litigation costs.

Succinctly put, the facts giving rise to the present Revision Petition, are: that the Complainants had obtained an Instant Health Care, Medical (Hospitalization) Risk policy, from the Insurance Company for the assured sum of 5,00,000/-. The policy was valid from 25.07.2004 to 24.07.2005. The said policy was renewed on 11.08.2005 for the period from 25.07.2005 to 24.07.2006. Complainant No.2 is stated to have been taking regular treatment at Indraprastha Apollo Hospital as a case of End Stage Renal Disease. When she fell ill, she was admitted in the said Hospital for treatment. Pursuant to the pre-approval certificate issued to the Complainants on 05.11.2004 by Respondent No.3/Opposite Party No.1, namely, M/s E. Meditek Solutions Ltd., the Third Party Administrator (for short "the TPA"), for an amount not exceeding 40,000/- and thereafter on 10.12.2004 and 16.12.2004 for an amount not exceeding 6,500/- each, Complainant No.2 took the treatment from the Apollo Hospital. However, on 15.01.2005, the TPA issued a letter to the Medical Superintendent of the said Hospital, informing them that since the liability of the Insurer (Insurance Company) was not determinable at that point of time, cashless facility towards the treatment of Complainant No. 2 (Smt. Kamla Devi) could not be extended. They were advised to collect all the expenses from her and later on, she may send all the original documents to the TPA for reimbursement and her case would be decided on the basis of policy terms and conditions. On account of the said communication, the Complainants had to pay all the expenses on the treatment as charged by the Hospital for the treatment taken by Complainant No.2 from 19.01.2005. On 16.02.2005 Complainants submitted the documents to the TPA for reimbursement of the said expenses, which were not reimbursed. The Complainants got issued a legal notice, dated 28.05.2005, to the TPA, and prayed for reimbursement of medical expenses to the tune of 2,20,000/- and restoration of cashless facility. Responding to the said notice, vide their letter dated 25.06.2005 the TPA not only contested the claims made therein, it asked Complainant No. 1 to return a sum of 1,40,562/- paid by them to the Hospital on treatment of Complainant No. 2, as at the time of approving cashless facility, it was not disclosed to them that Complainant No. 2 was hospitalized in the year 2002 in Apollo Hospital with Thalesemia Minor, CEF with ESRD on MHD with severe anemia with Multiple Uterine Mymatosis and is a K ** Minor Thalesemia since 31.07.1999. In response thereto, vide their letter dated 06.07.2005, the Complainants, while disclosing the details of all the earlier mediclaim policies obtained by them right from 16.09.1999 and stating that they had not made any claim from the earlier Insurance Company, viz. New India Insurance Company and asserting that after obtaining the policy in the year 2004 from the Insurance Company, they were provided cashless facility whenever Complainant No. 2 was admitted in Apollo Hospital for treatment, requested the TPA to withdraw their claim for refund of 1,40,562/-. Having failed to get any positive response, the afore-noted Complaint came to be filed before the District Forum, praying for the reliefs mentioned therein.

Upon notice, the Opposite Parties contested the Complaint. It was contended on behalf of the Insurance Company that when the initial policy was taken by the Complainants in the year 2001 for the assured sum of 3,00,000/-, which was valid from 25.07.2001 to 24.07.2002, Complainant No.2 was suffering from minor thalassemia prior to 31.07.1999, for which she had taken treatment from Dr. Sanjeev Jasuja of the Apollo Hospital and had also undergone laboratory tests at Dr. Lal''s Pathological Lab on 31.07.1999. Since she had a pre-existing disease, which fact was concealed from the Insurance Company at the time of taking the policy, the claim fell under the Exclusion Clause 4.1 of the said policy; the claim was repudiated in the year 2003; and as a matter of fact the Complainants were liable to refund a sum of 1,40,260/-, paid by the TPA directly to the Hospital.

On evaluation of the evidence adduced before it, by the contesting parties, the District Forum came to the conclusion that the Insurance Company had illegally and unlawfully rejected the claim of the Complainants and accordingly, while allowing the Complaint, issued the aforesaid directions to the Insurance Company, inter alia, observing thus:

"The present case is pending since 2005 and OP had filed his reply and also statement but OP had nowhere stated or taken the plea of pre-existing disease but rejected the claim of the Complainant on the same ground and to top it all renewed the policy from 25.7.05 to 24.7.06. It is apparent that OP is always prone to pocket the premium and does not take precaution to ensure that the Complainant is fit to take the policy. The Complainant is not asked to undergo any test. It is strange that OP has taken dual stand by alleging that Complainant has suppressed the pre-existing disease and then OP is also issuing the renewed policy with 25.7.05 to 24.7.06. When the claim is preferred by the complainant, the OP cannot now distract its step. The OP has now produced the record of the Apollo Hospital and it is recorded in the discharge summary which mentioned diagnosis "Thalesimia minor with chronic renal failure with BSRD MHD Post Dialysis febrile episode (subsided on its own) Severe anemia multiple uterine myomatosis". In the history it is mentioned that 36 years old female patient was a known case Thalesemia minor since 2002. The patient had weakness lassitude and headache for the last 3 or 4 days. The history has mentioned that the patient had irregular menstrual cycles following chronic renal failure with tending to bleed profusely during menses. Gynecological evaluation previously done 3 months ago showed evidence of multiple uterine myomatosis. She had profuse bleeding and passage of clots 3 months before for which she was being admitted at Apollo Hospital. Strange OP could lay off his hands of this report and is still crying hoarse that the Complainant has suppressed the disease." ( Underlined for emphasis).

Aggrieved, the Insurance Company carried the matter further in Appeal to the State Commission, which too dismissed the Appeal in limine, inter alia, observing thus:

"7. If the earlier policy had been obtained by the lady fraudulently from the appellant insurance company it should not have renewed the policy on 25.07.2005. The very fact that the policy was renewed without condition fully demonstrates that the contention of the counsel for the appellant is not correct. Since the appellant insurance company has issued the renewed policy it cannot now be heard to say that at the time of earlier policy, the complainant lady had suppressed the fact of her illness. There is as such no substance in the appeal, which is dismissed in limine." (Emphasis supplied).

Hence, the present Revision Petition.

We have heard Mr. Sushil Kumar Gupta and Mr. P.K. Ray, appearing respectively for the Insurance Company and the Complainant and perused the material on record.

It is trite that contract of Insurance is based on the principle of utmost faith - uberrimae , and rule of non-disclosure of material facts vitiating the policy still holds fidei the field. It is equally well settled that the said principle is applicable to both parties. To put it succinctly, the doctrine not only forbids either party from non-disclosure of the facts which the parties know; it equally binds both the parties to the terms of contract drawn on the facts disclosed. In the instant case, though except for TPA''s letter dated 25.06.2005, asking the Complainant to refund the amount of 1,40,562/-, paid by them directly to the Hospital, no other document, repudiating the claim by the Complainant has been placed on record. Nevertheless, it is clear from the Written Version filed on behalf of the Insurance Company, in opposition to the Complaint that the claim was not accepted on the ground that the Insured (Complainants) had concealed the factum of existence of the afore-said disease at the time of inception of the policy in question. It is significant to note that in its written submissions, it is candidly admitted that the Insurance Company had gained knowledge about the pre-existing disease of Complainant No.2 only when the TPA, vide letter dated 25.06.2005, while declining the request for cashless facility, had asked the Complainants to refund the afore-stated amount of 1,40,562/-. It is equally pertinent to note that, relying on the afore-noted letter of the TPA, in its written submissions the Insurance Company has mentioned the factum of the earlier Insurance Company, viz. New India Assurance Company, repudiating the claim of the Complainants under the Medical policy, some time in the year 2002. Thus, besides the fact that the Insurance Company has not specifically denied the stand of the Complainants that they had never made any claim with the said Insurance Company, despite making endorsement on the policy, issued for the first time w.e.f. 25.07.2004, to the effect that "cumulative bonus shall be applicable subject to confirmation from the previous insurers/HMO of the claims status on the earlier policies", the Insurance Company did not think it advisable to make any enquiry about the status of the earlier policies, stated to have been obtained by the Complainants from New India Assurance Company. Furthermore, the Insurance Company renewed the policy in the next year, from 25.05.2005 to 24.06.2006, with the afore-noted identical endorsement relating to the status of earlier policies. In our opinion, the Insurance Company having renewed the same policy for the next year as well, despite the fact that on its own showing, Complainant No.2 was taking treatment at the Apollo Hospital from time to time, it is now estopped from blindly accepting the opinion of the TPA that the claim preferred by the Complainants should be rejected on the ground that they had failed to disclose the disease, Complainant No. 2 was suffering from, since the year 1999.

In view of the afore-going discussion, we do not find any jurisdictional error in the concurrent finding of fact, returned by both the Fora below to the effect that the Insurance Company was not justified in not accepting the claim of 2,20,000/- made by the Complainants, warranting interference, in our limited Revisionary Jurisdiction in so far as the said finding is concerned. It is affirmed accordingly.

Having arrived at the said conclusion the question surviving for consideration is whether or not the compensation, amounting to 5,00,000/-, awarded by the District Forum and affirmed by the State Commission, on account of the afore-said deficiency on the part of the Insurance Company is justified. Regard being had to the facts at hand and the quantum of the claim by the Complainants, we are of the view that the compensation awarded is on the higher side. Hence, in our opinion compensation of a sum of 2,50,000/- would meet the ends of justice. It is ordered accordingly.

Resultantly, the Revision Petition is partly allowed and the order passed by the Fora below is modified to the afore-noted extent.

Vide order dated 05.03.2010, while staying the execution proceedings before the District Forum, the Insurance Company was directed to deposit in the District Forum the entire awarded amount. If that be so, the amount due to the Complainants in terms of the order passed by the District Forum, as modified by this order, shall be released to the Complainants forthwith on their moving an appropriate application before the District Forum. The balance amount, if any, shall be released to the Insurance Company along with accrued interest, if any. If for any reason the Insurance Company had not made the requisite deposit, the amounts due to the Complainants shall be remitted to them by the Insurance Company within four weeks from the date of receipt of a copy of the order, failing which the said amount shall carry interest @ 9% p.a. from the date of the order of the District Forum till realization.

The Revision Petition stands disposed in the above terms, leaving the parties to bear their own costs in these proceedings.