Health Insurers Cannot Deny Claims Based on Non-Disclosure After Accepting Ported Policies: Bombay High Court

The Burden of Diligence: Bombay High Court Clarifies Insurer Obligations in Policy Portability

In a clarifying verdict on the rights of health insurance policyholders, the Bombay High Court has ruled that insurance companies cannot shirk their responsibility by blaming regulatory infrastructure failures after accepting a ported policy. Justice Somasekhar Sundaresan emphasized that once an insurer accepts a risk through policy migration, they are viewed as having made an "informed decision," precluding later attempts to repudiate claims based on non-disclosures that should have been vetted during the underwriting process.

A Case of Portability and Repudiation

The dispute arose after Mr. Haresh K. Joisar, a policyholder with Star Health and Allied Insurance, migrated his coverage to Care Health Insurance Ltd in 2022. Mr. Joisar had a disclosed history of carcinoma, for which he had previously undergone chemotherapy—details that were ostensibly part of his file. Following his hospitalization, Care Health repudiated the claim, citing the insured's alleged failure to disclose his entire medical history during the porting process.

The Insurance Ombudsman initially ruled against the insurer, noting that the onus of ascertaining claim history falls on the company. Care Health challenged this, arguing that the Indian Insurance Bureau (IIB) portal—essential for sharing this medical data—was non-functional, and they were essentially "blind" to his prior claims history.

The Regulatory Framework: A Two-Way Street

At the heart of the legal controversy were the Insurance Regulatory and Development Authority (IRDA) regulations regarding policy migration. Justice Sundaresan’s analysis turned on the statutory design of portability, which allows policyholders to switch insurers without losing credit for previous policy years.

The Court noted that the regulations provide a clear, time-bound window for the existing insurer to provide data and for the new insurer to assess the risk. If information is missing, the new insurer has the autonomy to reject the porting request entirely. "It is inexplicable that Care Health agreed to port the policy and accept the premium without the information being made available," the Court observed, noting that a dysfunctional portal does not grant an insurer a waiver from its duty of due diligence.

Key Observations

The High Court’s judgment highlights the expectation of professionalism that insurance companies owe to the public. Key excerpts from the ruling include:

• "In these circumstances, considering the intensity of the promise that insurance companies hold to society, it is must be legitimately and reasonably expected that insurers would exercise the highest degree of professionalism and back to back, diligence in vetting the policy particulars and claim history of an applicant for porting, before accepting or rejecting a request for porting of the policy."
• "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."
• "Blaming the portal is not an option when the policy has been ported in line with the aforesaid regulatory framework."

Precedents and Principles

While the insurer relied on landmark cases like * Reliance Life Insurance Company Ltd. v. Rekhaben Nareshbhai Rathod * to argue for the doctrine of uberrima fide (utmost good faith), the Court distinguished the present case. Justice Sundaresan noted that these precedents regarding disclosure obligations do not apply to the specific regulatory framework of "porting," which involves a data handover between mature financial institutions specifically to enable an informed risk assessment.

Final Decision and Implications

The Bombay High Court dismissed the petition, upholding the Insurance Ombudsman’s award. The decision reinforces a critical consumer protection standard: insurance companies cannot accept premiums under a "porting" arrangement and subsequently cite their own failure to procure data as a ground to deny coverage. For the insurance industry, the ruling mandates a higher standard of gatekeeping, ensuring that the "hassle-free" promise of portability remains a reality for policyholders.