Karnataka State Consumer Disputes Redressal Commission Dismisses Complaint Against Oriental Insurance Over Repudiation Of Health Insurance Claim

Brief Facts

The respondent M.K Paulose had taken a health insurance policy with Oriental Insurance Company Ltd (Appellant), initially with a sum insured of Rs. 50,000. During renewal in February 2016, he enhanced the coverage to Rs. 1 lakh, and this policy was regularly renewed through 2019.

The Respondent was hospitalized on 28-08-2018 at KMC Hospital, Mangaluru, where he underwent heart surgery. Although the policy provided a cashless benefit up to Rs. 1 lakh, the insurer, Oriental Insurance Company, approved only Rs. 50,000 and repudiated the remaining Rs. 50,000.

The insurer relied on clause 7.3, which made the increased coverage available only after four continuous renewals, and clause 4.1, which excluded coverage for Coronary Artery Disease for four years from the increased claim coverage, and denied the claim.

The Complainant paid the remaining amount himself and approached the Dakshina Kannada District Consumer Disputes Redressal Commission alleging deficiency in service. The District Commission dismissed the complaint against OPs 1 to 3 but allowed the complaint against Oriental Insurance, and directed the payment of Rs. 50,000 with 5% interest and Rs. 10,000 as compensation and litigation costs. Aggrieved, the Oriental Insurance Company filed an appeal challenging this order.

Arguments by the Respondent

The Respondent argued that the appellant committed deficiency in service by approving only Rs. 50,000 for his heart surgery, even though his coverage had been enhanced to Rs. 1 lakh. He submitted that he had continuously held the increased sum insured since 2016 and was therefore entitled to the full benefit. He contended that the insurer's reliance on Clauses 7.3 and 4.1 to limit the claim was unfair and unjustified. Since he had to personally pay the remaining ₹50,000, he alleged that the insurer's actions amounted to unfair trade practice and clear deficiency in service.

Arguments by the Appellant

Oriental Insurance Company argued that the District Commission overlooked the policy terms. They argued that the respondent originally had coverage of Rs. 50,000, which was later increased to Rs. 1,00,000. However, when the respondent underwent heart surgery on 28-08-2018, the enhanced coverage had completed only three years and would complete four years only in February 2019. Referring to Clause 7.3, the insurer maintained that the increased sum insured becomes effective only after four continuous renewals. They also relied on Clause 4.1, which excludes Coronary Artery Disease from coverage for the first four years after enhancement. Since the surgery occurred within this exclusion period, they argued that higher coverage could not be claimed.

Observations of the Commision

The Karnataka State Consumer Disputes Redressal Commission, while hearing Oriental Insurance Company's appeal, held that the claim was rightly repudiated by the Appellant. It observed that the Appellant's reliance on Clause 7.3 to deny the claim was justified, noting that the enhanced sum insured becomes fully effective only after four continuous renewals; a condition the Respondent had not yet met.

The Commission, referring to Clause 4.1 of the policy observed that no deficiency of service was made out, as the policy expressly excluded Coronary Artery Disease for the first four years after the enhancement. It held that the increased coverage had not become applicable at the time of the surgery, and therefore, the insurer's partial repudiation was valid.

The Commission allowed the appeal and held that the District Commission had made an error by relying on medical literature and general observations instead of interpreting the policy conditions. It set aside the District Commission's order and dismissed the complaint against all Opposite Parties.

Case Title: Oriental Insurance Company Ltd v. M.K.Paulose SC/29/A/2125/2022

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