The Burden of Due Diligence: High Court Curbs Insurer's Ability to Deny Claims Post-Porting

In a significant ruling that reinforces consumer protections within the insurance sector, the Bombay High Court has affirmed that insurance companies cannot rely on technical glitches—such as a dysfunctional industry portal—to escape their obligation to conduct due diligence when porting a health insurance policy. The court dismissed a petition by Care Health Insurance Limited , which sought to challenge an Insurance Ombudsman award that favored a policyholder whose health claim was previously repudiated.

The Backdrop: A Case of Ported Promises

The dispute originated with Mr. Haresh K. Joisar, an individual who had previously been insured by Star Health and Allied Insurance Co. Ltd. Having undergone treatment for carcinoma in 2021, the policyholder sought to "port" (migrate) his insurance coverage to Care Health Insurance Limited in early 2022.

Following the migration, Mr. Joisar was hospitalized and a claim was filed. Care Health promptly repudiated the claim, citing the non-disclosure of the prior carcinoma diagnosis. The Insurance Ombudsman disagreed, ruling that the insurer was responsible for ascertaining the insured's claim history during the migration process.

Arguments: Doctrine of Good Faith vs. Statutory Duty

Care Health argued that under the doctrine of uberrima fide (utmost good faith), the insured had a fundamental obligation to disclose their medical history regardless of the portability process. The insurer further contended that the Indian Insurance Bureau (IIB) portal, intended to share such medical and claim data, was dysfunctional at the time, leaving them in the dark about the patient's past treatment.

The respondent, conversely, highlighted that the regulatory framework for porting—governed by the IRDA (Health Insurance) Regulations, 2016—places the onus on insurance companies to verify information during the underwriting window. They argued that if the insurer could not access the needed information, they possessed the right to reject the porting request entirely before accepting the premium, rather than accepting it and later citing nondisclosure as a ground for rejection.

Legal Analysis: The Regulatory Framework

Justice Somasekhar Sundaresan’s analysis turned on the interpretation of Regulation 17 of the IRDA Regulations. The court observed that "migration" is a statutory right designed to move a policyholder from one insurer to another without the burden of restarting the risk assessment process from scratch.

The court held that the regulatory framework expects the incoming insurer to function with a "standard of diligence." If the data required to verify a policyholder's health history is unavailable, the insurer remains empowered to decline the porting request. By accepting the premium and initiating coverage, the court concluded that the insurer is presumed to have performed an informed assessment of the risk.

Key Observations

• "The onus of ascertaining the entire claim history when porting a policy would lie on the insurance company."
• "If the IIB portal was dysfunctional, it would always have been open to the Petitioner to reject the request for porting on the premise that it had not received the requisite information."
• "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."
• "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."

The Verdict: Implications for Future Policies

The Court dismissed the writ petition, confirming that the award delivered by the Insurance Ombudsman was well-reasoned and aligned with the objective of the IRDA regulations.

This ruling serves as a vital precedent for future insurance disputes. It shifts the emphasis back to the insurer’s duty to perform robust underwriting, ensuring that the convenience of "portability" does not become a trap for consumers. For insurance companies, the message is clear: proceed with diligence when onboarding migrated policies, for once the premium is accepted, the window for claiming "ignorance" of the policyholder’s history is effectively closed.