THIRUVANANTHAPURAM: The State Consumer Disputes Redressal Commission (SCDRC) has criticised insurance companies for misinterpreting the clause on “pre-existing illness” to reject legitimate claims. While disposing of a case related to a claim rejection by the Life Insurance Corporation of India (LIC), the commission clarified that a pre-existing disease pertains to treatment received within 48 months prior to the issuance of the first policy.
The LIC had rejected a claim filed by a Pathanamthitta native, citing non-disclosure of a pre-existing illness. The policyholder had taken a ‘Health Protection Plus’ plan covering himself, his wife, and two children for the period from May 2011 to May 2027, with an annual premium of Rs 30,000.
In July 2015, he underwent treatment at the Kovai Medical Centre and Hospital in Coimbatore for large hepatocellular carcinoma. The Third Party Administrator (TPA) denied his claim of Rs 5 lakh on the grounds that he had undergone a laparotomy for bowel obstruction in 1982, classifying it as a pre-existing condition. However, the policyholder contended that his liver cancer was primary in nature and unrelated to any prior illness.
The Pathanamthitta District Consumer Disputes Redressal Commission ruled in his favour, directing LIC to reimburse Rs 3 lakh, along with a compensation of Rs 25,000 and Rs 3,000 in litigation costs. During the pendency of the complaint, the policyholder passed away, and his wife and children were impleaded as claimants. The SCDRC’s order came in response to an appeal filed by LIC. A bench comprising commission president Justice B Sudheendra Kumar, judicial member D Ajith Kumar, and member K R Radhakrishnan considered the case.
The commission referred to a circular issued by the Insurance Regulatory and Development Authority of India (IRDAI) for the definition of a pre-existing disease, which states: “Any condition, ailment, or injury or related condition(s) for which you had signs or symptoms, and/or were diagnosed, and/or received medical advice/treatment within 48 months prior to the first policy issued by the insurer.”
The SCDRC found that LIC had disregarded the IRDAI guidelines and repudiated the claim based on a surgery that had taken place decades earlier. Furthermore, LIC argued that the policyholder’s failure to disclose the 1982 surgery constituted suppression of material facts.
However, the commission dismissed this argument, noting that this reason was not mentioned in the initial repudiation letter, and an insurer cannot introduce new grounds beyond what is stated in the rejection notice.
The commission observed that, under the ‘major surgical expense’ provision, the payable amount was 60% of the sum assured, which equated to Rs 3 lakh. It upheld the district commission’s decision to award the claim, along with the costs and compensation.
Clarification
While disposing of a case related to a claim rejection by the Life Insurance Corporation of India (LIC), the commission clarified that a pre-existing disease pertains to treatment received within 48 months prior to the issuance of the first policy