A Two Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justice Dr Dhananjaya Y Chandrachudand and Justice B.V. Nagarathna passed a #Judgment dated 06-12-2021 in the case of Manmohan Nanda V. United India Assurance Co. Ltd. &Anr Civil Appeal No. 8386/2015 and held that if the #Insurance #Company is satisfied about the #medical condition of the proposer and on such satisfaction it issues the Insurance #Policy, then the Insurer cannot repudiate the #mediclaim alleging pre-existing illness, where such an #illness is not expressly excluded under the Policy from the insurance cover.
In the present case, the Appellant had sought an overseas medi-claim policy (Medi-claim Policy) as he intended to travel to USA to attend his sister-in-law’s daughter’s wedding. The Insurance Company (Respondent No. 1) medically examined the Appellant prior to the consideration of his request for issuance of a Medi-claim Policy. On an examination, the Report stated that the Appellant had Diabetes-Type-II (also known as Diabetes Mellitus) and other than that no medical condition was found.
Thereafter, the Insurer accepted the proposal form and the Appellant was issued the Overseas Medi-claim Business and Holiday Policy bearing Policy Number 190100/46/09/70000008 valid from 19-05-2009 to 01-06-2009. On 19-05-2009, the Appellant boarded a flight to San Francisco, USA at around 1:00 a.m. from the Delhi Airport and reached San Francisco at around 2:00 p.m. On reaching San Francisco Airport, the Appellant got a heart attack and was admitted to SFO Medical Centre at the San Francisco Airport. After he received initial medical treatment, he was shifted to the Mills Peninsula Medical Centre. Angioplasty was performed on the Appellant and three stents were inserted to remove the blockage from the heart vessels. Later on, when the Appellant claimed treatment expenses from the Respondent-Insurer the same was repudiated by the Insurer stating that as the Appellant had a history of Hyperlipidaemia and Diabetes, which fact was not disclosed while obtaining Insurance and that the Policy did not cover pre-existing conditions and complications arising from that.
Before the National Consumer Disputes Redressal Commission
The National Consumer Disputes Redressal Commission (NCDRC) vide Judgment dated 22-05-2015, observed that since the Complainant while obtaining the Medi-claim had not disclosed the fact he was under medication, there was a failure on the part of the Complainant to comply with his duty to make complete disclosure of his health conditions. This is prima facie contrary to the principle of ‘uberima fides’ i.e. ‘utmost good faith’ between the Insurer and the Insured. Hence, the Commission held that the Insured was not entitled to claim benefit under the Policy and the repudiation of the Insurance Claim was valid. The NCDRC passed the Judgment in favour of the Insurance Company and concluded that the Complainant had a history of Hyperlipidaemia and Pepticulcer Disease in addition to Diabetes Mellitus. Since the same was disclosed by the Complainant to medical authorities in the USA, there was no reason why he could not have disclosed to the Insurance Company at the time of obtaining the Medi-claim Policy.
Before the Hon’ble Supreme Court of India
Aggrieved, an Appeal was preferred before the Hon’ble Supreme Court of India. After taking into consideration, the facts of the case and the arguments advanced by the Parties to the dispute, the Apex Court reiterated the Principles of ‘uberrimae fidei’ and the ‘contra proferentem’ rule.
Principle of uberrimae fidei
The term ‘uberrimae fidei’ is defined as “mutual good faith between persons in a particular relationship, as guardian and ward, attorney and client, parent and child, physician and patient, confessor and penitent.”
The Supreme Court observed that Insurance Contracts being special contracts, the person seeking insurance is expected to fully disclose all material facts relating to the risk involved. In this regard, the Bench made the following observation:
“The duty to make full disclosure continues to apply throughout negotiations for the contract but it comes to an end when the contract is concluded; therefore, material facts which come to the proposer’s knowledge subsequently need not be disclosed.”
The Apex Court observed that
“34. Just as the insured has a duty to disclose all material facts, the insurer must also inform the insured about the terms and conditions of the Policy that is going to be issued to him and must strictly conform to the statements in the proposal form or prospectus, or those made through his agents. The principle of utmost good faith imposes meaningful reciprocal duties owed by the Insured to the Insurer and vice versa. This inherent duty of disclosure was a common law duty of good faith originally founded in equity but has later been statutorily recognised. It is also open to the parties entering into a contract to extend the duty or restrict it by the terms of the contract.”
The Apex Court while reviewing the merits of the case, was of the opinion that having put all the facts together, one can conclude that the Insured had made a declaration of pre-existing disease of Diabetes Mellitus. Subsequently, the development of a heart condition which is common in patients of Diabetes Mellitus cannot be deemed to be wilful non-disclosure or a breach of the Principle of uberrimae fidei. The Court after considering the Contra Proferentem Rule decided in favour of the Insured.
The term ‘Contra Proferentem Rule’ means that if a contract is ambiguous, it will be construed in a way that is the least advantageous to the party that drew up the contract.
“As per the doctrine, when words are to be construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction applies.”
The Apex Court relying upon the case of General Assurance Society Ltd. v. Chandmull Jain AIR 1966 SC 1644, observed that where there is an ambiguity in the contract of insurance or a doubt arises, it has to be construed contra proferentem against the Insurance Company.
The Hon’ble Court further discussed Delhi Development Authority v. Durga Chand Kaushish AIR 1973 SC 2609 where it was observed:
“In construing a document one must have regard, not to the presumed intention of the parties, but to the meaning of the words they have used. If two interpretations of the document are possible, the one which would give effect and meaning to all its parts should be adopted and for the purpose, the words creating uncertainty in the document can be ignored.”
Again reference was made to Central Bank v. Hartford Fire Insurance Co. Ltd. AIR 1965 SC 1288, where it was held:
“What is called the contra proferentem rule should be applied and as the policy was in a standard form contract prepared by the insurer alone, it should be interpreted in a way that would be favourable to the assured.”
Applying this Rule, the Apex Court observed as follows:
“A prudent insurer has to gauge the possible risk that the policy would have to cover and accordingly decide to either accept the proposal form and issue a policy or decline to do so.”
The Bench opined that if, on a perusal of the Medical Reports, the Insurance Company is satisfied that there was no risk of pre-existing illness, and on such satisfaction it issues the Policy, it cannot thereafter repudiate the claim alleging pre-existing illness, where such an illness is not expressly excluded under the Policy from the insurance cover.
This is yet another Judgment that shows that Insurance Company always want to escape their liability at the time of pay out. Luckily, Courts have always taken the rule of Contra Proferentem when deciding such repudiated claims to the relief of the Insured. The above Judgment is a shot in the arm for all victimized Insured when the Insurance Companies dodge their responsibilities of paying the claims. Sadly, it’s a fact that when Insurance Policies are sold, the Insured is given very rosy picture only to be disappointed if he has to make the claim. The difficult part is however, that all victimized Insured cannot afford the legal fees to fight protracted battle till Supreme Court of India.
Sushila Ram Varma
The Indian Lawyer & Allied Services