Non-Hospitalisation No Ground For Insurer To Deny Mediclaim If Treatment Connected To Insured Disease: Karnataka High Court

The Karnataka High Court has ruled that a health insurance company cannot deny reimbursement merely because the insured patient was not hospitalised for the administration of injections, where such injections were part of the continuing treatment for a disease covered by the policy.

“Hospitalisation is not an end in itself; it is a mode in which medical treatment may be administered. Where advances in medical science enable a treatment which would otherwise have required a longer hospital stay to be administered safely and effectively without hospitalisation, the absence of hospitalisation cannot, by itself, be treated as determinative of whether the treatment is connected with the insured disease,” Justice Suraj Govindraj observed.

The Court highlighted that neither the patient nor a hospital be expected to undergo unnecessary hospitalisation solely to satisfy a contractual condition.

“Neither the patient nor the hospital can reasonably be expected to undertake an unnecessary hospital admission merely to bring the treatment within the insurer's preferred interpretation of the policy,” the Court said.

The petitioner, National Insurance Company, had challenged the Permanent Lok Adalat order. The order directed the company to pay Rupees 2,85,470 with an interest, at six percent per annum from the date of petition until realisation for the expenses paid to administer two injections— Zoladex and Xgeva— to the first respondent, who was undergoing treatment for Stage IV carcinoma of the prostate. The order also directed the petitioner to pay compensation of Rupees 25,000 for the inconvenience caused to the first respondent.

The petitioner argued that the injections were not covered under the policy because it only applied to expenses incurred for hospitalisation and day-care treatment. The petitioners said that the policy defined day-care treatment as procedures undertaken under anaesthesia that, if not for technical advancements, would have otherwise required hospitalisation of more than 24 hours.

The petitioners contended that the injections were ordinarily administered on an outpatient basis, which was expressly excluded from the day-care treatment definition in the policy.

Rejecting the petitioner's argument, the Court said, “The construction suggested by the petitioners would, in the peculiar circumstances of this case, result in coverage being denied not because the treatment was unrelated to the insured disease, but because modern medical practice made hospitalisation unnecessary. Such an interpretation cannot readily be accepted where the treatment is demonstrably part of the continuing management of the very disease for which the insured had obtained coverage.”

The Court noted that contractual provisions in the health insurance policies, particularly the exclusionary clauses, should be construed in the context of the policy as a whole and the purpose of the insurance coverage.

“The insurer cannot rely upon an isolated expression in a definition clause to defeat coverage in respect of treatment which, in substance, forms part of the insured's treatment for the covered disease, unless the exclusion is clearly attracted,” the Court added.

Terming the petitioner's interpretation of the policy narrow, the Court said, “However, where the claim falls within a reasonable construction of the policy and the treatment is admittedly connected with the insured disease, the insurer cannot adopt an unduly restrictive interpretation merely because the treatment was capable of being administered without hospitalisation.”

The Court further dismissed the petitioner's plea to remand the case to the Permanent Lok Adalat for conciliation, noting, “It would be incongruous to remit the matter merely to direct the parties to undertake conciliation when one party has categorically stated that it is not willing to make any payment or consider any settlement proposal. Conciliation cannot be converted into a process whereby one party is required to persuade the other to abandon or withdraw a claim which it asserts to be legally sustainable. Nor can a Permanent Lok Adalat compel either party to agree to terms which it does not accept.”

The Court added that remitting the matter for conciliation at this stage would further delay the proceedings without advancing the object of Legal Services Authority Act, 1987, which aims to provide an expeditious, inexpensive and efficacious mechanism for dispute resolution.

Finding that the Permanent Lok Adalat had not committed any error of law or jurisdiction, the High Court dismissed the petition. It directed the insurer to pay the amounts mentioned in the Permanent Lok Adalat order and additionally imposed nominal costs of Rupees 50,000 on the petitioner payable to the respondent.

Case: M/S NATIONAL INSURANCE CO LTD & another vs PADMANABHA SHETTY G & others

WRIT PETITION NO. 14682 OF 2024 (GM-RES)

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