Kerala High Court: Writ Jurisdiction Can Be Invoked In Cases Where Denial Of Medical Insurance Or Claims Are Made In Arbitrary Manner

The Kerala High Court held that the jurisdiction under Article 226 of the Constitution can be invoked in cases where the denial of medical insurance or claims is made in an arbitrary manner.

The Court held thus in Writ Petitions preferred against the denial of the full claim and the complete rejection of the subsequent claim by the Insurance Company.

A Single Bench of Justice P.M. Manoj observed, “… declining the claim in respect of the treatment undergone amounts to denial of treatment itself. Thereby, there is violation of the right to life provided under Article 21 of the Constitution of India. … Article 21 stands for the right to life, which is stated to have been violated in the present case. The jurisdiction under Article 226 can be invoked in cases where the denial of medical claims or insurance is made in an arbitrary and unreasonable manner.”

The Bench reiterated that the right to medical treatment is a right identified under fundamental rights and once the insured has undergone treatment or a surgical procedure on the expert opinion of the concerned doctor, the insurer cannot deny the claim.

Advocate R. Parthasarathy appeared on behalf of the Petitioner, while Advocate (Standing Counsel) Lekshmy S. appeared on behalf of the Respondents.

Brief Facts

The Petitioner was a policyholder under a policy of the Life Insurance Company (LIC), valid upto March 31, 2024. It covered medical treatment for the Petitioner along with three other family members, namely his wife and two children. Due to hospitalization of his wife, the Petitioner submitted a Claim Petition for a sum of Rs. 60,093/- along with supporting documents in 2016. The Petitioner was directed to provide the history and duration of the hysterectomy, as certified by the treating doctor, along with the first consultation paper. Even after having multiple communications, the claim of the Petitioner was not acted upon.

Hence, he preferred a reminder along with a certificate issued by the Urologist and then, LIC sanctioned the claim which was limited to just Rs. 5,600/-, stating that “the benefits under the policy are not directly related to actual expenses incurred by you”. This was challenged in a Writ Petition and during its pendency, the Petitioner’s wife continued treatment. During her treatment, an expenditure of around Rs. 1,80,000/- was incurred. The Petitioner then preferred another Claim Petition against which it was communicated to him that the claim cannot be considered at all due to pre-existing illness, irrespective of prior medical treatment or advice. As per the Petitioner, the reason assigned for rejecting the subsequent claim was unusual since the hernia repair surgery undergone by his wife in 2006 has no connection with the present disease namely Vesicovaginal fistula repair. Therefore, he approached the High Court.

Reasoning

The High Court in view of the above facts, said, “… the facts involved in this case appear to be bona fide. Hence, at the first instance, it appears that the writ petition is maintainable. … Rejection of the claim for the expenses incurred for such treatment availed by the insured amounts to denial of treatment.”

The Court noted that the denial of the claim was made without affording sufficient opportunity to explain the side of the insured and there is no mention in those impugned orders that sufficient opportunity has been given to the insured prior to rejecting his claim, which, prima facie amounts to a violation of principles of natural justice.

“There is nothing to show that there was non-disclosure of pre-existing disease, either fraudulently or with knowledge of its falsity. The conditions under Section 45 are therefore not fulfilled to recall and repudiation of the claim cannot be sustained. Under such circumstances, the contention raised by the counsel for the respondents with respect to Section 45 of the Insurance Act, 1938 on the basis of the afore mentioned explanation cannot be accepted”, it remarked.

The Court further reiterated that suppression of a pre-existing medical condition can justify repudiation of a claim only if the non-disclosed ailment is material to the risk and has a direct nexus with the contingency for which the claim is preferred.

“A fact is 'material' in insurance law only if it would have influenced the judgment of a prudent insurer in assessing the risk undertaken. Mere non-disclosure of an ailment that has no connection with the present medical condition for which the treatment has been taken cannot be treated as material suppression. To hold otherwise would mean that even trivial or unrelated past conditions could be used to deny coverage, thereby defeating the very purpose of health insurance”, it held.

The Court observed that in this case, there is no nexus between vesicovaginal fistula, the present treatment undergone by the wife of the insured and the Hernia repair, which was done in the year 2006, the alleged pre-existing condition.

“There is no medical nexus between the two, nor can the earlier surgery be said to have any bearing on the present illness. Hence, the omission to disclose the Hernia repair cannot be treated as material suppression, and repudiation of the claim on this ground is wholly unjustified”, it added.

The Court also said that it is a common character of human beings, due to concerns regarding their health, to feel insecure about future contingencies and their ability to bear the financial burdens arising therefrom.

“Such insecurity becomes a cultivating ground or a manuring situation for the insurance sector. To make use of this insecure feeling of the human being, sweet words, which are showered upon them with respect to the so offered coverage, often conveyed by the canvassers, will lead to a ray of hope”, it added.

The Court remarked that it is a matter of concern that insurers, particularly Public Sector Institutions like the Life Insurance Corporation of India, often repudiate claims on trivial or technical grounds.

“The object of life insurance is to provide security against unforeseen contingencies, which are defeated when claims are rejected for reasons neither substantial nor material. Insurance is a contract of utmost good faith, and the duty of fairness lies equally on the insurer, as contracts of adhesion policies must be construed in favour of the insured and repudiation for consequential inaccuracies or ambiguities cannot be justified”, it emphasised.

The Court was of the view that to permit repudiation on the basis of inconsequential or ambiguous disclosures would not only run contrary to the principle of contra proferentem but would also undermine the element of trust which forms the foundation of insurance.

“A policyholder reasonably expects the insurer to indemnify him against the risk expressly covered. The courts have a bounden duty to protect such reasonable and legitimate expectations of the insured. … The court cannot overlook the fact that the very purpose of a health insurance policy is to provide financial security to an individual at a time of medical emergency”, it enunciated.

Moreover, the Court observed that a condition which rigidly limits surgical benefit to an enumerated list of procedures must be construed liberally and if the medical intervention undergone by the insured is of a nature that's comparable in seriousness, necessity, and medical consequence to those listed, the claim shouldn't be denied on the ground of technical non-inclusion.

Conclusion

The Court noted that after accepting the policy, and availing the premium year after years, the insurer cannot later repudiate the claim on the ground of some ambiguity.

“Considering the larger interest of the public, who would otherwise be deprived of the very purpose of obtaining insurance, I deem it appropriate to exercise judicial interference. In this case, since the claim had already been rejected nine years ago, it would not be fair on the part of this Court to direct the insurer to reconsider the same. This relief is granted as a matter of abundant caution, to set a precedent in similar situations where a large number of medical claims are rejected by both public and private sector undertakings in the field of health and life insurance, by pointing out some trivial, unsustainable and arbitrary reasons”, it concluded.

Accordingly, the High Court quashed the impugned orders and directed LIC to allow the claim of the Petitioner without any further delay.

Cause Title- Dr. A.M. Muraleedharan v. The Senior Divisional Manager Life Insurance Corporation of India & Anr. (Neutral Citation: 2025:KER:66325)

Appearance:

Petitioner: Advocates R. Parthasarathy and B. Krishnan.

Respondents: Advocate (Standing Counsel) S. Lakshmy

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