Policy change doesn't impact continuity

Kanwaljit Singh had an individual Mediclaim family policy from National Insurance since 2007. The policy covered his family of four persons. At the time of inception of the policy, his son Jasnoor Singh was insured for Rs 50,000, which was enhanced three times in subsequent years – to Rs 55,000 in 2009, Rs 1,07,500 in 2010, and then to Rs 2,54,000 in 2013. In 2014, the family switched over from individual coverage to family floater policy for a total amount of Rs 5 lakh.

Jasnoor fell ill and was hospitalised twice in 2014—the first time from May 24, 2014 to July 19, 2014, and again from August 31, 2014, to October 17, 2014. The total bill for both the hospitalisations came to Rs 8,55,226. When a claim was lodged, it was repudiated without assigning any reason.

Later, the insurer paid Rs 27,550 computed at 50 per cent of the coverage of Rs 55,000 in 2009. Since the entire sum insured of Rs 5 lakh under the family floater was not paid, Singh file a complaint before the District Forum for the balance amount. National Insurance contested the case contending that the ailment was pre-existing, so the claim would be payable on the basis of the coverage limit existing in the year 2009, four years prior to the illness.

The Forum ruled that four years prior to the ailment treated in 2014 would mean that the coverage limit of Rs 1,07,500 in 2010 would have to be considered. It held that 50 per cent of this would have to be paid after adjusting the amount already paid. The Forum also awarded 9 per cent interest, Rs 5,000 as compensation, and Rs 2,000 towards litigation costs.

Singh appealed to the State Commission which ordered the entire amount of Rs 5 lakh to be paid under the existing family floater policy. It also increased the compensation amount to Rs 30,000 and costs to Rs 10,000.
The insurer filed a revision. The National Commission set aside the order of the State Commission and restored that of the District Forum. So, Singh approached the Supreme Court.

The apex court noted that there was continuous insurance coverage since 2007 even though the policy was subsequently changed from individual to family floater. It observed that there was no evidence to show that the ailment was pre-existing. So, the Court concluded that the claim would have to be settled on the basis of the existing sum insured of Rs 5 lakh. However, since the family floater policy provided that a claim for any single illness would be limited to 50 per cent of the sum insured, the Court held that Rs 2,50,000 would be payable.

Accordingly, by an order dated August 14, 2019, delivered by Justice Vineet Saran along with Justice Uday Lalit, the Supreme Court directed the insurer to pay the remaining amount along with 7.5 per cent interest. It also awarded Rs 50,000 as compensation and Rs 30,000 towards costs.

The writer is a consumer activist

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