The Supreme Court on Thursday said it is the duty of the insurer to inform policy holders about the limitations it was imposing in the renewal of a mediclaim policy.
The top court set aside the order passed by the National Consumer Disputes Redressal Commission (NCDRC), which said the policyholders were presumed to be known about the terms and conditions and that it was not open to them to claim ignorance of the terms under the fresh policy which had placed a percentage and monetary cap on certain types of surgical procedures.
Justice S. Ravindra Bhat said: “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. The impugned order of the NCDRC as well as the order of the State Commission are hereby set aside”.
Justice K.M. Joseph, in a separate judgment, agreed with the relief proposed by Justice Bhat.
Justice Joseph said: “The claim under the Consumer Protection Act must be allowed on the ground that there has been a deficiency on the part of the insurer. The insurer brought about a change in the policy. This change introduced a cumbersome limitation. It kept the insured in the dark about the limitation at the time when the renewal notice was issued, and what is more, the premium was accepted.”
He emphasised the insurer had a duty to inform the appellants that a change regarding the limitation on its liability was being introduced and this duty to take the insured into confidence was breached in the present case.
A couple, along with their son, obtained an insurance policy in the year 2006 with certain conditions attached. They obtained the policy in question for the year 2008, however, the son was not included and there was also change in the amount of the insurance. The period of insurance was operative from March 28, 2008 to March 27, 2009.
One of the petitioners underwent angioplasty in June 2008 and a claim for Rs 3,82,705.27 was submitted. The insurer paid a sum of Rs 2 lakh only and the reduction in the claim was based on the express provisions which were in force in the policy in issue.
Justice Joseph noted that under the earlier policy for the previous year such a clause was conspicuous by its absence.
The district forum directed the insurer, United India Insurance Co Ltd, to pay the appellants the Rs 1,75,000 as balance amount and also awarded Rs 5,000 compensation. The insurer challenged this order in the State Consumer Commission, which held that the terms of the policy were known to the appellants who were bound by it. The couple moved the NCDRC with a revision petition, which upheld the insurer’s contention. Later, they challenged the NCDRC order before the top court.
A bench headed by Justice Bhat and Joseph heard the matter.
The bench observed that it is the insurer’s obligation to inform every policyholder about any important changes that would affect her or his choice of product. “The obligation of the insurer to provide information to existing and policy holders, for them to exercise choice, meaningfully, and choose products suited to their needs, existed. In this case, that obligation was breached,” said Justice Bhat.