Om Prakash Ahuja vs Reliance General Insurance Co. Ltd. etc.
Background
Om Prakash Ahuja had taken a family health insurance policy from Reliance General Insurance covering ₹2 lakh for illness and ₹4 lakh for critical illness. His wife was diagnosed with ovarian cancer and treated over several months; his claims for her treatment expenses were repudiated by the insurer on the ground that she had an undisclosed pre-existing rheumatic heart disease at the time the policy was taken. Consumer fora at the District and State level ruled in Ahuja's favour on reimbursement, but the National Consumer Disputes Redressal Commission, while upholding reimbursement for the period the policy was valid, set aside directions requiring the insurer to renew the policy for subsequent years, on the basis of the same non-disclosure ground.
Decision Breakdown
The Supreme Court noted that the insurer itself never challenged the finding that the non-disclosed rheumatic heart disease was immaterial, since the wife had actually died of an unrelated illness (cancer): the insurer had already paid the reimbursement for the policy period without further challenge. Having accepted that the non-disclosure did not justify repudiation of the claim for the valid policy period, the insurer could not then invoke the very same ground to refuse renewal of the policy in later years, especially since IRDA guidelines require health policies to ordinarily be renewed and forbid arbitrary refusal of renewal. The Court held the precedents cited by the insurer inapplicable since those cases concerned repudiation during the valid policy period, not renewal. It allowed the appeals, set aside the National Commission's order, restored the District and State Fora's directions for renewal, and held the appellant's reimbursement claim justified and payable.
Lesson Learnt
An insurer cannot reuse a non-disclosure ground it has already accepted as immaterial (by paying a claim without further challenge) to later deny renewal of a health insurance policy, under IRDA norms, health policies must ordinarily be renewed and cannot be refused on arbitrary or previously-settled grounds.