Insurance Claim Rejection Over 2.5-Hour Shortfall Arbitrary: Thrissur Consumer Commission Holds Star Health Liable

The District Consumer Disputes Redressal Commission, Thrissur, comprising C.T. Sabu (President), Sreeja S. (Member) and Ram Mohan R. (Member), held Star Health and Allied Insurance Company Ltd. liable for deficiency in service for rejecting a COVID-19 insurance claim on the ground of shortfall in hospitalization duration.

The Commission held that repudiation of the claim solely on the basis of a shortfall of about 2.5 hours from the stipulated 72-hour hospitalization requirement was arbitrary, unreasonable and unsustainable in law.

Brief Facts

The complainant, Robin A.K., had purchased a “Corona Rakshak Policy” from Star Health and Allied Insurance Company Ltd, with a sum insured of ₹1,00,000. The policy was valid from July 31, 2020 to May 12, 2021 and provided a lump sum benefit upon a positive COVID-19 diagnosis requiring a minimum continuous hospitalization of 72 hours.

During the policy period, the complainant tested positive for COVID-19 and was admitted to hospital on October 16, 2020 and discharged on October 19, 2020. He subsequently filed a claim for the insured amount.

The insurance company rejected the claim on the ground that the complainant had been hospitalized for nearly 70 hours, which fell short of the minimum 72-hour requirement stipulated under the policy terms.

Aggrieved, the complainant approached the Commission alleging deficiency in service.

Contentions of the Insurer:

The insurer admitted the issuance of the policy and the complainant's COVID-19 diagnosis but justified the rejection by relying on the terms and conditions of the policy mandating a minimum 72-hour hospitalization for admissibility of the claim.

Observations and Decision:

The Commission observed that the complainant had tested positive for COVID-19 and was hospitalized during the policy period, thereby fulfilling the core objective of the policy.

It held that the shortfall of about 2.5 hours from the required 72-hour hospitalization was minor and could not be treated as a fundamental breach. The Commission emphasized that policy terms should not be applied in a hyper-technical manner that defeats their purpose and that insurers must act fairly.

Accordingly, the repudiation of the claim was held to be arbitrary and unsustainable. The complaint was allowed, directing the opposite parties to pay ₹1,00,000 as the insured amount, ₹10,000 as compensation, and ₹5,000 as litigation costs, along with 9% interest from the date of filing till realization.

Case Title: Robin A.K. v. Star Health and Allied Insurance Company Ltd.

Case No.: CC 159/21

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