Policy Renewal conditions cannot be changed without informing the insured ;SC

 

Name of the case & date of judgment

Jacob Punnen and another versus United India Insurance Co Ltd, 

Justices S Ravindra Bhat and KM Joseph 

9 Dec 2021

Law laid

Insurance Company did not disclose the change in claim entitlement conditions at the time of renewal of the previous policy SC gives mediclaim relief  to senior Senior Citizens

Facts of the case ;

1.      Two senior citizens, had availed a mediclaim policy from United India Insurance in 1982, which was renewed on yearly basis. In 2008, the one of them had to undergo angioplasty surgery. A claim of Rupees 3.82 lakhs was submitted by him to the insurer with respect to the angioplasty surgery. The coverage at the relevant time was Rs 8 lakhs. However, the insurer accepted the claim for only Rupees 2 lakhs, saying that the renewed agreement had a clause which limited the liability with respect to surgeries like angioplasty to an amount of Rs.2 lakhs.

2.      Consumer Complaint filed  before the District Consumer Forum, which ruled in their favour. District Forum's order was reversed by the State Commission in insurer's appeal. In revision before the National Commission claimant they could not secure relief.

3.      Matter before the Supreme Court and SC gave judgment in favour of senior citizens

Arguments by the insurance company

 

·         A careful reading of the policy for the year 2008-2009 clearly shows that it differed radically from the policy from the previous year because of a condition of  monetary limit on the reimbursable expenditure has been indicated by the insurer.

·         It has no legal duty to inform the policy holder about the changes in policy conditions from the lapsed policy,

·         There is no concept of 'renewal' as such since it is a fresh agreement executed on annual basis.

Complainants Contention

·         The amended terms of the 2008-09 Gold policy were received only after three months of the payment of the renewal premium, and thus there was no scope for them to have read and given consent to the cap on angioplasty coverage in the new Gold policy.

·         Clause stated in the policy states  “In respect of senior citizens who are our existing policy holders, they will be allowed to renew the policy on existing terms and conditions but at revised rates of premium under Gold policy. They should not be compelled to migrate to the new (Gold) scheme. If they so desire to enter the new scheme, the same may be allowed on collection of fresh proposal”.  In such a situation, there can be said to be no consensus ad idem on the introduction of the cap on the coverage by the insurer because they  were not informed that they had paid premium for a new policy, but were led to believe that they had in fact renewed a pre-existing policy on the same terms,

·         Policy of giving grace period for renewal means continuing on the same terms &conditions and if grace period is over then it is fresh policy –this defines the concept of  fresh policy

SC ,Justice Ravindra Bhat held –

1.      “If the insurer is unilaterally introducing fresh terms about which the policyholder is in the dark, then it can be regarded only as a renewal of the existing terms. Because, in such a situation, the parties are not at consensus ad idem. The policy holder is under the impression that the existing conditions are being renewed.”

"The insurer was clearly under a duty to inform the appellant policy holders about the limitations which it was imposing in the policy renewed for 2008-2009. Its failure to inform the policy holders resulted in deficiency of service".

2.       ‘The Insurer had a duty to inform the appellants that a change regarding the limitation on its liability was being introduced. there was unjustifiable non-disclosure by the Insurer about the introduction of clause of limitation and, in this case, it constituted a deficiency in service and resultantly the appellants are entitled to relief".

 

3.      The judgment also referred to IRDA(Health Insurance) Regulations 2016, particularly Regulation 11 and 13, which had restricted insurers from compelling an insured to migrate to other schemes and imposed a duty on the insurers to ensure adequate dissemination of product information.

"These regulations only underline expressly what was implicit, i.e., the insurer's obligation to inform every policy holder, about any important changes that would affect her or his choice of product.

 

4.      The Court noted that the insurer has not produced any evidence to show that the age nt had disclosed the material changes to the appellants. 

Justice KM Joseph wrote a separate judgment reaching the same conclusion. Justice Joseph held that a renewed contract of insurance may provide terms which are different from the terms of the original contract of insurance.

 

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