Insurer cannot deny claim by summarily changing terms An insurance policyholder can refuse to accept unilateral changes in conditions that are detrimental to his/her interests. A company that alters insurance policy terms unilaterally and rejects a subsequent claim can be restrained

Background: Insurance firms unilaterally change policy terms at the time of renewal and reject claims or pay a limited amount on the basis of revised conditions. This is not permissible.
Case Study: Gadiwalla, his wife, son and daughter were covered under a mediclaim policy from United India Insurance, which was first taken in 2002 and renewed over the years without break.
In 2008, Gadiwalla’s son was diagnosed with having erythrodermic psoriasis.The treatment is infliximob induction therapy that comprises a series of injections to be taken over a period of time. Each injection is given intravenously and its administration takes over three hours. There is a risk of adverse reactions that can even result in the patient’s death. Hence, a patient receives treatment in an intensive care unit where he/she can be continuously monitored. The claim for the first three rounds of treatment was paid by the insurance company. The claim for the fourth round was rejected on the grounds that hospitalization was not necessary as the injection could have been administered as a clinical procedure in the out-patient department (OPD).
Gadiwalla then noticed that the insurance company had surreptitiously changed the policy terms without his knowledge or consent. The revised policy put him at a disadvantage as it imposed restrictions on the amount payable for certain operations, including major surgeries, and discontinued the no-claim bonus.
Gadiwalla along with the Consumers Welfare Association filed a complaint before the south Mumbai district forum. The insurance company contested the case and contended that the earlier claims had been paid according to the policy conditions prevalent then, but was no longer payable as the terms had been revised. The company claimed that it had the right to alter the terms at the time of renewal. The forum considered the case of Bimal Krishna Bose vs United IndiaInsurance Co Ltd [III (2001) CPJ 10 (SC)], where the Supreme Court had interpreted “renewal” as “repetition of the original policy that gets extended for a further period on identical terms”. Although a new contract may come into existence on renewal, it would be on the same terms as the original policy.
In its June 10 judgment delivered by president S .M Ratnakar and member S S Patil, the forum held that changing the policy conditions arbitrarily would constitute an unfair trade practice. The forum directed the insurance company to renew the policy in accordance with the original conditions in force on February 21, 2002, when it was first issued. In connection with the rejected claim, the forum observed that Dr Arsiwala, who was an expert doctor treating Gadiwalla, had certified the necessity of administering the treatment in the ICU. Even the company had earlier paid identical claims for the same treatment, so there was no reason for taking a contradictory stand now to reject the claim. The forum ruled that the claim would be payable and directed the insurance company to pay Rs 87,143 along with interest at 9% per annum from September 17, 2009 till it is paid.
Since the treatment is of a recurrent nature, requiring the injection to be taken periodically, the forum further directed that subsequent claims for the same treatment should not be rejected on the grounds that it could have been taken in the OPD. The forum awarded Rs 5,000 as compensation and Rs 5,000 as costs and gave the company a month to comply with the various directions.
Conclusion: An insured can refuse to accept unilateral changes in policy conditions that are detrimental to his/her interests. The forum can also restrain theinsurance company from using the same excuse to wrongly reject subsequent claims, which may recur in future.

Source :The Times of India.
Date : 01/07/2013
Writer: Jehangir B Gai


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