Q iar t4 IJITW Ch I ^a mi^lCFm*Q INSURANCE REGULATORY AND

JO DEVELOPMENT AUTHORITY

Ref. Circular Ref. CAD/Insu. Omb/10-I 1

The CEOs of all General and Life Insurers

November 23 2010

Re: Order dated 09.09.2010 passed by Delhi High Court in W.P.No.10638/06 -Vinod Kumar Aneja vs. NIA and Others - Awards passed by Insurance Ombudsman

We enclose a copy of award passed by Delhi High Court in the above case. The Hon'bleCourt had, inter alia, made the following important observations in this case:

• It is not open for the insurer to challenge the Award of the Ombudsman.

• The mechanism of adjudication by the Insurance Ombudsman is an alternative disputeredressal mechanism envisaged under the RPG rules 1998 and the insurers havethemselves devised this dispute redressal mechanism and have also bound themselvesunconditionally to honour such Awards.

You are advised to be guided by the above observations of the Hon'ble High Court. AllCases filed by your Company against the orders of Ombudsmen should be reviewed in thelight of the observations made in the cited case and the final status of these cases, if any, beinformed to us immediately.

97 6 C,,,- Ck

(A.Giridhar)Executive Director

,Tftpm wfq, c m cra, 111, a? i^-500 004. qic Parishram Bhavan , 3rd Floor, Basheer Bagh , Hyderabad -500 004 . India.© : 91-040-2338 1100,6: 91-040-6682 3334 Ph.: 91-040-2338 1100, Fax: 91 -040-6682 3334

-zc : irda@irda.gov.in 44: www.irda .gov.in / www.irdaindia .org E -mail :irda@irda .gov.in Web.: www. irda.gov. in I www . irdaindia.org

C S._

IN THF: IIIGII cot RF OF Di l iiI AT \I. \V' D:1,111

R-114.

W.P.((')N o. 10038 u1*_006

VINOI KUMAR ANI.I;A (Since deceased)TIIROI 'Gil: Ills H-'C1\l 1-11-1,116Ms. VI -.I "NA ANLJA &- (.)RS.

Thn t, h: None...... Petitioners

NEW INDIA ASSURANCE CO. L'I 1). & ORS. ..... RespondentsThrou h: Mr. Sal 11 Paul, Advo : ate for R- I .

COR,\\1: .iUti'I'ICI ^. tY[URA.I.Ii)IJAR

01

I

'%,

versus

ORDI'1209.0 9.2 (11 I1

1. The prayer in this writ petition is for a mandamus to he issued to

Respondent No.1 New Indi: t Assurance Company Ltd. ('NIACI.) to

reimburse the expenses incurred by the Petitioner Io %%Iards the treatment of

cancer (intravenous chemotherapy) in terms if ' the medickuin policy taken by

the Petitioner . The second prayer is for a direction to Respondent No.1 to

implement the Awards dated 18t1i March 2 004 and 2(i '' April 2005 of the

Insurance Ombudsman by accepting the requisite premium for the period 301t'

July 2003 to 11^t' April 2004 on Pro rata ha_.i:, from the Petitioner and process

the claim in respect of the medical expel:-,,s incurred by hire during that

period, and pay : hire the admix ihIC claim att , nunts.

2. The facts leading to the filin g of this petition are titut on 30th July 1999 the

Petitioner took a mediclaim policy from N;itional Insurance Company Ltd.

(`NICI.'). This policy was regularly renev.cui till 291' .tiny 2002 . 'T'hereafter,

the Petitioner switched over to Respondent No.). The policy was to expire on

P•/C) Na 1063H :. f 2006 Page I of 9

281h July 2003 and on 10'h July 2003 the Petitioner deposited a cheque of Rs.

10,129/- with Respondent No.1 for renewal of his mediJairn policy. It may

be mentioned that by that time, the Petitioner had lodged the following claims

which were all paid by Respondent No. I :

Si. N_ ^. I reatment Pei-lo rd mount Status(A) X20.1.2003 to -6.2.200611283- Paid

A

(13) 18.3.2003 to D) -1.2003 x,0654,- Paid(C) __ .18.4.2003 to 12 .().2003 Qo63/- Paid(I)) .15.6.2 003 to S. -.,0n :11(1 1/- 1(I:.) 118.7.200: to 2 7.7.2003 i L)15/- t'aid

3. The Petitioncr states that no reply was received as r.c 'ards his request fines

renewal. It v as disclosed to the Petitioner that rene" al could be only after

excluding the clause for cancer treatment It was , i,o conveyed that the

policy was oni% for one year ,u;d It was in tie discretil-:, of Responden: No.i

whether to renew the policy or not. A further up:Hlication made by the

Petitioner on 30`1, July 2003 enclosing the t mewal p- a, ,um. was returned

Respondent No.I I.

4. Consequently, on 30t1' July 2003 and 8 `t' August 2ttn; , the Petitioner filed his

claims before the Insurance t. ► tnbudsman (I )elhi & R tja,than). On 18th March

2004, the Insurance Ombu,is man passed an aw;-i,i 'that the New India

\ssurance 1- mnipany Ltd. shall renc'.\ the n c ciclaini policy of the

complainant and shall give him all the bcttelits of . •atirnuty as if his poiic.

had been renewed on 30`x' July 2003 without any br,•; i,-.,.

5. Before th:' Insurance Oml,udsman. Rc^,p udent No ; was represented by its

Branch N1i, cer Shri D.K. Khanna 1 hands . aver to the Insurance

r

Ombudsman a letter dated 30"' luly 2004 si1_-ii,,d by it,< ► ^', isional Manager in

which the reasons for not rent ^^i ► tg the medic aim poii, of' the complainant

had been sununarized.

6. The first reason given by Respondent No. I was tha; in the very first year

itself the Petitioner had made Iive claims and, there; or.:. had taken a policy

"only with a view to making claims." This was re;, c•_•d by the Insurance

Ombudsman by pointing out that during the previous ve: ► rs the Petitioner had

a policy with the NIC1, i.e. li,,nt 30`11 July ;)')9 till ." July i002. lie had

made no claii, and in Fact i. ,: ► rned a mulati . onus of 15°,o. The

second reason was that the Petitioner had concealed material facts in his

proposal form that he was still'erin- from hypertension and bronchitis. This

was also rejected by the Insurance Ombudsman. It was noticed that in a

covering !.;ttct dated 8"' February 2003, the conipkiti wit described his case

history and I u he had been ! .. pertensivc t, -r the l:: a our years. 1lowever.

there was no concrete evidctt,.c to show tl ► at there y t a firm diagnosis of

hypertension prior to 30`h July 1999. hurt her, there c .ts no diagnosis of the

Petitioner suffering from bro-tchitis. Cai.-er had h,c_ iagnosed only during

the early part of 2003. 'fhc , aims were I respe treatment of cancer

which developed only in carly part of '003. 1 mere 'ias, therefore, no

suppression of any n ► ateriai facts. It wa:. held by Ittsura cc Ombudsman

as under:

"\Vhat applies to renewal also applies to claims If the

Insurance Company had any concrete evidet,,:c to prove that

the complainant had suppressed material t acts regarding his

ailment, then the claims ought not to have !)ecn ent rained;

they ought to ha,.c been repudiated. OI) the contrary, the

Insurance Company has admitted that it hats paid all the

W.P.(C) No. 106 iR of 2006 Page 3of9

claim.; of the complainant . If that is so, then there is

absolutely no reason why the me,iiclaim policy of the

complainant should ii,,( be renewed ..

7. It was in the above circuurAances that the Insurance Ombudsman in the

Award dated IS'" March 2007 concluded as under:

"the action of the Insurance Company in t;ic case of the

complainant is high-handed and arhiuary and .n; worthy of a

public sector company A Public hector Company should

have rood and sufficient reasons hetore ret'u:,u i,g to renew

the Mediclaiin policy ot'a customer In the present case, the

Insurance Company has not valid reason at ;ill for refusing

to renew the Mediclaiin policy of the eonipl;!'u;int."

AOk

Consequently. tlic directions as set out in p;_u;a 4 above were issued by the

Insurance Onlb,idsnlan.

8. It is not in dispute that Respondent No.1 accepted the above Award dated

18`1' March 2001 of Insurance ( )n,budsman. 1 lowever. the Petitioner's policy

was renewed funn 15'r' April '04 to 14"i .April 200. The Petitioi.-^r then

wrote to Respondent No. I on :2.-1"' April 200-1 pointing out that this failure to

renew the policy from 30't' July 2003 onwards may have been because of an

inadvertent error and that the necessary endi,isement 5 imuld be made on the

renewed policy He followed tiro by remir;,ierz on 2S' :April 20(14 and 12

May 2004. When there was no response. lie was compelled to again approach

the Insurance Ombudsman with a letter dated 1-l't' May 2OU4.

9. The stand of Respondent 1 was that the Insurance Ombudsman had

exclusions (although there is gap in insurancL • i for all fi:t.ire claims except all

claims incurred during the intervening period 30`h Jul% 2003 to 14th April

2004 . In other words all expenses incurred during the i:ltervening period are

not payable under the policy".

10. It is pointed out by the Petitioner that , !aims ma,

April 2004 were honoured by Respondent but I1,1t the claims made

between 30' ► ' July 2003 and 14``' April 2004. Again, the claim made by the

Petitioner on 9"' February 2005 was rejected on the gr,,und that "claims for

oral chemotherapy shall not be admissible".

11. On 26'11 April 2005, Office of Insu;: ace Ombu dsman wrote to the

Respondent No. 1, with a copy to the Petitiolk i. clan ifyil , as under:

"On the basis of m} Award dated 18'h March 2004, the

course of action to l c adopted by the Insur.u:ce Company

now is to collect from the Lomplainant the requisite

prerrilunl for tine period 30th July _1.u03 to 14` April 2004 on

pro rata basis and to process the claims in respect of

medical expenses incurred by the complairl,uut during this

per111d and pay him the admissible claim a:l:,,unts after due

scrutiny of hills".

13. During the pendency of this writ petit i on, the I'ei^tioner expired and his

legal representatives were brought on rcc'^rk'. by an under dated 1 1 h l ebruarv

200x.

14. The submissions of Mr. Salil Paul, learned couti`c! ('Or Respondent No. I

have been heard. He submitted first that although I`:•.>pondcnt No.l had not

challenged (lie Award dated 18`t' March 2(104 or sub>,:.luent directions dated

26`h April 2005 of the Insurance Ombudsman, Res!:ondent No.1 had in fact

partly implemented the said Award by renewing the niediclaim policy from

15`h April 2004 to 14`h Apri! 2005. When asked .\ Iiy the policy was not

renewed with effect from July 2003 itself, he erred to Section 64 VB

of the Insuruu>.ce Act which Lays down "no risk to I'e -t-.SUmed unless premium

is received in advance". It is submitted that since Respondent No.l had not

collected the premium for the period ?0°i July 2003 to 14`h April 2004, it

could not entertain the claims arising during this period. Secondly, it is

submitted that the Insurance Ombudsman could not entertain claims in respect

of non-renewal of mediclaitn policy as they do not Id!! under any of the five

' categories of complaints that can be entertained ! the Insurance Ombudsman

under Rule 12(3) of the Redressal of Public Grievance ('RI'G') Rules, 1998.

lie referred to a clariiicat.lrv Circular d,,ted 18"' N Lurch 2004 issued by the

governing body of the General Insurance Council. M _ mbai where after noting

the above RPG Rules it \%as directed that Insurance Ombudsman may be

advised 'in to entertain complaints in respect of rton-renewal of mediclaitn

policies by general insurers. Ile also relied upott the judgment of the

Karnataka High Court in B. Krishna 1'11at v. llni n of India (decision dated

30`h July '002 in W.P. No. .)429 of 2001).

W.P.(C) No. 11)638of 2006 Page 6 of 9

15. This Court rinds that the above stand of l.csponderii No. I is untenable. It

is not open for Respondent No 1, after accepting the A\\ ands dated 18"' March

2004 and- 26"' April 2005 of the Insurance Ombudsman, to choose to

implement such Awards only in part. No objections to the Awards of the

Insurance Ombudsman by Respondent No. 1 cars be pcrl,witted at this stage. In

fact, it is not open to the insurance companies to challenge such Award to the

Insurance' Ombudsman . The mechanism of an adjudication by the Insurance

Ombudsman is an alternative dispute redressal mechanism envisaged in the

RPG Rules, 1978. Therefore. a claimant ruder a police has to necessarily go

before the Insurance Ombudsman in the first place for redressal. The

insurance companies have themselves devised tlii:o dispute redressal

mechanism . They have also bound themselves unconditi<-^nally to honour such

Award of such Insurance Ombudsman. It too late in the day for

Respondent No. I to seek to wu gle out of the Awards dated 18"' March 2004

and 26"' April 2005 of the Insurance Oinbudsmai: on im.v ground whatsoever.

The decision III B. Krishna Bhat was in it di ffel ant set of facts. In that case

there was no order of the Insurance Otnbudsinan that was binding on the

insurance company.

16. The Award dated i 8"' `.larch 2004 has in fact been acted upon by

Respondent No.], but for some reason, only in part The reasons for not

v therho ,,. , rnnfin !1oiiclt, frnm 'n" lido ')O1 is mandated b

r

dated 26"' April 2005 , Respondent No.] ought to have c. Ilected the premium

pro rata ibr the period 30"i July 2003 to 14"' April 'ttt)4 and renewed the

mediclaint police of the deceased Petitioner h r this period as well

The e in1uuuicatjon dated 181t' March 200.1 ti in the office of the

governing body of the Gcnel;il Insurance Council it '\lumbai ad-,Isuwg the

Insurance Ombudsman not to cutertain con plaints in i.pect of non-renewal

of mediclaim :>olicies, was i< ued on the same date the Award of the

Insurance Oml udsman i.e. 1S'" March 200-1 Without ^ \-imining the question

of validity of , Bch advice, this ('Dort is of the view that the said advice could

not govern the Award dated I ^" March 2004hwhich had already been passed

on that day in respect of the complaint of the Petitionci ,^ I,ich was made prior

!hereto,

18 Consequently, the writ petition is allowed ith direction to

Respondent N,).I to commumiicate to the Petitioner', LRs the pro rata

premium aim uit payable lur the renewal of the ii ediclaiut policy of

the Petitionei for the period 30`t' Jule 200-) to 14"' April 2004

within a period of two weeks from today. The I.Rs of the deceased

Petitioner will make the pavnicnt of the said premium amount within

a further pei iod of two weeks thereafter Within further period of

four weeks thereafter. Respondent No 1 will process all the claims

from the date of the claim till the date of its payment. \Vith the consent of the

other I,Rs, tlt payment be made to Slut. Vecna .\ neja the wife of the

deceased Petitioner . Absent such consent, the amount will be paid in three

equal shares by three sepanac cheques in favour of each of the three LRs.

The writ petition is accordingly allo\\cd in tic above terms, in the

circurnstancc^ with no order as to costs.

^c^) ^- -

S. t\1URALII ) IIAR, J

SEPTEMBER 09, 20111

do

W.P.(C) No . 10638 of 2006 Page9 of 9