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2025 Supreme(Online)(Bom) 1762
HIGH COURT OF BOMBAY
SANDEEP V. MARNE, J
Prakash Mehta – Appellant
Versus
The Insurance Ombudsman for State of Goa and Mumbai Metropolitan Region – Respondent
CIVIL APPELLATE JURISDICTION WRIT PETITION NO.18745 OF 2024
For the Appellants/Petitioners: Mr. Akshay Patil, Ms. Girija Balkrishnan, Mr. Jarin Doshi, Ms. Devika Mahadekar
For the Respondents: Mr. Rajesh Kanojia, Ms. Deepika Prabhala, Ms. Sangita Upadhyay
Insured's non-disclosure of alcohol consumption and hypertension was not grounds for claim denial, as no nexus was established between these factors and the cancer treatment.
Headnote:(A) Insurance Act, 1938 - Section related to duty of disclosure in insurance contracts - Writ Petition challenging award of Insurance Ombudsman rejecting a claim for denial by an insurer-Claim for medical expenses was repudiated on grounds of non-disclosure of alcohol consumption and pre-existing ailments. (Paras 3, 4, 16, 17, and 49)
(B) Principle of Utmost Good Faith - The insurer's obligation to disclose material facts and the insured's need to make such disclosures to allow the insurer to gauge risk appropriately. (Paras 46, 47)
(C) Relevance of Pre-existing Conditions - The court found that there was no nexus between the insured’s non-disclosure regarding alcohol consumption or hypertension and the claim for cancer treatment. (Paras 24, 36)
Facts of the case:
The Petitioner, challenging an insurance claim denial of Rs.17,77,147/- for medical treatment related to cancer, submitted claims which were denied due to alleged non-disclosure of daily alcohol consumption and hypertensive condition at policy inception. The claim was refused despite the insurer's continued acceptance of premiums and opportunity to renew the policy.
Findings of Court:
The repudiation of the claim based on alleged non-disclosure was deemed unjustified given the circumstances and behavior of the insurer regarding renewal and acceptance of risk.
Issues: Whether the non-disclosure constituted a valid ground for denying the claim, and whether the insurer’s treatment towards the premium and renewals indicated that the alleged non-disclosures affected its decision to provide coverage.
Ratio Decidendi: The court held that mere occasional alcohol consumption and a common lifestyle disease like hypertension could not warrant claim repudiation as there was no clear nexus between those factors and the cancer diagnosis. The insurer’s actions did not support a finding that these factors materially influenced their risk assessment.
Result: The Petition was allowed, the Ombudsman’s Award was set aside, and the insurer was directed to pay the claimed amount with interest.
| Table of Content |
|---|
| 1. challenge to insurance ombudsman award (Para 1) |
| 2. background on petitioner’s insurance claims (Para 2 , 3 , 4 , 5 , 6 , 7) |
| 3. arguments on non-disclosure of alcohol consumption and hypertension (Para 8 , 9 , 10 , 19) |
| 4. opposing arguments by insurer and inconsistency in claim denial (Para 11 , 12 , 13 , 14 , 15 , 16) |
| 5. court's examination of insurance claim denial reasons (Para 17) |
| 6. court's observations on nexus between disclosures and claim (Para 18 , 26 , 33) |
| 7. analysis of the insurer's conduct regarding policy renewal (Para 20 , 24 , 27 , 36) |
| 8. consideration of grounds for claim denial (Para 21 , 22) |
| 9. nexus between non-disclosure and insurer's liability (Para 23 , 25) |
| 10. court's findings on alcohol consumption grounds (Para 28) |
| 11. implications of porting insurance policy (Para 29 , 30 , 31 , 32) |
| 12. insurer's actions after knowledge of petitioner’s health (Para 34 , 35) |
| 13. legal framework of insurance contract obligations (Para 37 , 38 , 39) |
| 14. relevant case law on duty of disclosure (Para 40 , 41 , 42 , 43) |
| 15. final judgment and rationalization of anticipations (Para 44 , 45 , 46 , 47) |
| 16. conclusion and directives from the court (Para 48) |
| 17. conclusion and order for petitioner’s claim payment (Para 49) |
1) Rule. Rule is made returnable forthwith. With the consent of the learned counsel appearing for parties, the Petition is taken up for final disposal.
2) The Petitioner has filed the present Petition challenging the Award dated 10 June 2024 passed by the Insurance Ombudsman, Mumbai, thereby rejecting the complaint preferred by him, in which he had challenged repudiation of claim by the second Respondent- Insurance Company. The claim of the Petitioner was towards expenditure incurred by him towards medical treatment of Rs.17,77,147/-.
3) Briefly stated, facts of the case are as under:-
Petitioner had secured Health Insurance Policy from M/s. Royal Sundaram General Insurance Company Ltd. (Royal Sundaram) having policy cover of Rs.3,00,000/-, which commenced from 3 September 2003. Under the policy, Petitioner and his wife were covered under health insurance. Policy was renewed every year till 2020 and with no-claim bonus, the insurance cover had gone up to Rs. 4,50,000/- over the period of years. Petitioner was persuaded to port the health insurance policy from Royal Sundaram to Care Health Insurance Ltd. (Respondent No.2) with offer of provision of normal floater insurance cover of Rs. 5,00,000/- for himself and his wife. He was also persuaded to enhance the policy cover known as ‘top-up’ cover by Rs. 50,00,000. Accordingly, with porting of the policy, Petitioner and his wife were given normal policy cover of Rs.5,00,000/- and under the top-up plan, the policy cover was enhanced to Rs.55,00,000/- jointly for the benefit of the Petitioner and his wife. Petitioner paid aggregate premium of Rs.13,23,634/- to the second Respondent, which issued Health Policy No.33902486 for a period of three years commencing from 29 September 2021 to 28 September 2024. Petitioner was diagnosed with tumour in his abdomen in July-2022 and was subjected to several diagnostics tests including biopsy. The diagnostics revealed that he was suffering from Non-Hodgkin’s Lymphoma (cancer) and was advised to undergo chemotherapy and radiation therapies. He was admitted in Breach Candy Hospital for the purpose of biopsy on 22 July 2022 and for the purpose of chemotherapy on 3 August 2022. Petitioner submitted a Claim Form on 18 August 2022. However, he received claim denial letter dated 3 September 2022 by which Respondent No.2 stated that the claim was not payable as per policy terms and conditions citing the reasons of (i) non-disclosure of habit of daily drinking alcohol at the time of policy inception and (ii) non-disclosure. Similar letter was received by the Petitioner on 4 September 2022. On 5 September 2022 one more claim denial letter was received by the Petitioner in which following two reasons were stated for denial of c
