Supreme Court Orders Insurance Claim Settlement in Mediclaim Policy Dispute

The case of Kanwaljit Singh v. National Insurance Company Ltd. revolves around a dispute concerning the settlement of a medical insurance claim under the Parivar – Mediclaim for Family Policy. The Supreme Court was called upon to decide whether the insurance company was justified in limiting the claim payout, and whether the appellant was entitled to the full sum insured under the policy.

The Supreme Court ruled in favor of the insured, directing the insurance company to pay ₹2,50,000 along with compensation for mental agony and litigation costs. This judgment highlights the importance of adhering to policy terms and ensuring fair treatment of insurance claims.

Background of the Case

The dispute arose when the appellant, Kanwaljit Singh, sought reimbursement for the medical expenses of his son, Master Jasnoor Singh. The key developments in the case were:

• Since 2007-08, the appellant had been purchasing individual mediclaim policies for his family members.
• In 2014-15, he opted for a Family Mediclaim Policy with a sum insured of ₹5,00,000 for himself, his wife, and two children.
• During the policy period, his son required hospitalization on two occasions:
• First hospitalization: 24 May 2014 to 19 July 2014 – Medical bill of ₹5,40,741.
• Second hospitalization: 31 August 2014 to 17 October 2014 – Medical bill of ₹3,14,485.
• The total medical expenses amounted to ₹8,55,226.
• The insurance company initially rejected the claim without any explanation.
• Later, based on an earlier individual mediclaim policy of ₹55,000 from 2009-10, the insurance company paid only ₹27,550.
• Dissatisfied, the appellant approached the District Consumer Disputes Redressal Forum seeking full compensation.

Arguments by the Appellant (Kanwaljit Singh)

The appellant argued:

• The insurance company’s refusal to pay the full claim amount was arbitrary and violated the terms of the Family Mediclaim Policy.
• There was no evidence that his son had a pre-existing disease when the original individual policy was taken in 2007-08.
• The policy provided a total coverage of ₹5,00,000, and the insurer should have honored the claim up to this amount.
• The calculation of 50% of the insured sum should have been based on the 2014-15 Family Mediclaim Policy and not on previous individual policies.

Arguments by the Respondent (National Insurance Company Ltd.)

The insurance company countered:

• Since Master Jasnoor Singh had a mediclaim policy in 2009-10 with a sum insured of ₹55,000, the maximum payable amount should be 50% of that sum (i.e., ₹27,550).
• The illness was a pre-existing condition, and therefore, the claim was limited.
• The policy terms stated that for any single illness, only 50% of the sum insured would be paid.

Key Observations by the Supreme Court

The Supreme Court examined the policy terms and found the insurance company’s stance to be unjustified. The Court made the following key observations:

• The appellant had been regularly renewing the policy since 2007-08, and there was no evidence of pre-existing illness at the time of first issuance.
• The insurance company had already admitted liability by partially reimbursing the claim, contradicting its own argument of pre-existing disease.
• The Family Mediclaim Policy clearly stated that for any one illness, 50% of the total sum insured should be paid.
• The correct calculation should have been based on the 2014-15 Family Policy sum insured of ₹5,00,000, making the amount payable ₹2,50,000 instead of ₹27,550.

Supreme Court’s Judgment

The Supreme Court ruled:

“Since the sum insured for the Family Mediclaim Policy was ₹5,00,000, the insurance company is liable to pay 50% of this amount, i.e., ₹2,50,000, towards the medical expenses incurred for the treatment of Master Jasnoor Singh.”

The Court directed:

• The insurance company shall pay ₹2,50,000 minus the amount already paid (₹27,550).
• The insurer must also pay ₹50,000 for mental agony and harassment.
• Litigation costs of ₹30,000 shall be awarded to the appellant.
• Interest at 7.5% per annum shall be paid on the balance amount from the date of filing the complaint until the actual payment.

Implications of the Judgment

The ruling has significant implications for policyholders and the insurance industry:

• Insurers must honor policy terms: Insurance companies cannot arbitrarily limit claim amounts by relying on past policies.
• Pre-existing condition claims require evidence: Insurers must prove pre-existing illnesses before denying claims.
• Policyholders are entitled to full benefits: Consumers should be aware of their rights and challenge unfair insurance denials.
• Courts will ensure fair settlements: The judgment reinforces consumer protection laws in insurance disputes.

Conclusion

The Supreme Court’s decision in Kanwaljit Singh v. National Insurance Company Ltd. ensures that insurance companies do not unfairly deny policyholders their rightful claims. By directing the insurer to pay ₹2,50,000, the judgment upholds the principle of fairness in health insurance disputes and reinforces the legal protection available to policyholders.

This ruling serves as a crucial precedent in ensuring that insurance companies follow proper claim settlement procedures and do not misuse technicalities to limit payouts.

Petitioner Name: Kanwaljit Singh.
Respondent Name: National Insurance Company Ltd..
Judgment By: Justice Uday Umesh Lalit, Justice Vineet Saran.
Place Of Incident: Chandigarh.
Judgment Date: 14-08-2019.

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