Insurer Cannot Deny Claims Based on Non-Disclosure After Accepting Ported Policy: Bombay High Court

Duty of Diligence: Bombay High Court Clarifies Insurer Obligations in Porting Health Policies

In a significant ruling for policyholders, the Bombay High Court has affirmed that health insurance companies cannot hide behind faulty digital infrastructure to avoid the consequences of accepting a ported insurance policy. Justice Somasekhar Sundaresan of the Bombay High Court dismissed a petition by Care Health Insurance Ltd. , clarifying that once an insurer accepts a request to port an insurance policy, they are deemed to have exercised sufficient diligence.

The Backdrop: A Ported Policy and a Disputed Claim

The dispute arose after Mr. Haresh K. Joisar migrated his health insurance policy from Star Health and Allied Insurance Co. Ltd. to Care Health Insurance Ltd. in January 2022. Mr. Joisar had a prior medical history involving non-healing patches on his tonsils, diagnosed as carcinoma, for which he had previously undergone chemotherapy.

After the migration was complete, Mr. Joisar’s wife lodged a hospitalization claim. Care Health repudiated the claim, citing the non-disclosure of the prior carcinoma diagnosis. The Insurance Ombudsman originally ruled against the insurer, noting that the company had a responsibility to ascertain the claims history during the porting window. Care Health challenged this, arguing that the Indian Insurance Bureau (IIB) portal—meant for data sharing during porting—was dysfunctional at the time, leaving them with incomplete information.

The Court's Legal Reasoning

Justice Sundaresan’s judgment focused on the statutory framework of the IRDA (Health Insurance) Regulations, 2016 . The Court emphasized that the regulation sets a clear timeline and procedure for insurers to exchange data and decide whether to underwrite a risk.

The Court held that the insurance company maintained the power to reject a porting request if they felt they lacked sufficient information. By choosing to accept the premium and the policy, Care Health made an informed business decision.

"The insured is entitled to believe that the new insurer had taken an informed decision on accepting the porting request," the Court observed, noting that allowing an insurer to accept a premium and later claim ignorance of the insured's history would violate the very spirit of "hassle-free migration" intended by policyholders' rights.

Key Observations

The judgment provides a strong mandate for professional standards in the insurance industry:

> "Having accepted the request for porting and having happily accepted the premium, the breakdown in the IIB portal cannot be the reason for excusing Care Health from exercise of diligence before taking a decision on porting the policy."

> "It would be presumed that a decision to take over the risk of the insured had been taken as an informed decision on the basis of such information."

> "The proposition is not that the insured has no responsibility whatsoever in providing the information. Instead, the proposition is that when the insurer accepts the porting request, he does so with eyes open and it is presumed to be an informed decision."

Implications for the Insurance Sector

This judgment reinforces the principle of accountability. Financial institutions, operating as "mature" entities, cannot use the dysfunctionality of regulatory tools as an excuse to shift the burden of disclosure exclusively onto the consumer after the fact.

For the insurance industry, this ruling serves as a stern reminder that the "doctrine of utmost good faith" regarding disclosure must be balanced against the insurer’s own "back-to-back diligence" during the onboarding of new policies. Moving forward, insurers are expected to scrutinize risks before accepting porting applications, rather than relying on retroactive rejections if later claims do not align with their internal risk assessments.