The District Consumer Disputes Redressal Commission (East), Delhi held Star Health and Allied Insurance Co. Ltd. liable for deficiency in service after wrongly rejecting Anuradha Narang’s health insurance claim, ruling that incidental diagnoses cannot justify denial when treatment was for a covered illness.
NEW DELHI: The District Consumer Disputes Redressal Commission (East), Delhi found Star Health and Allied Insurance Co. Ltd. liable for deficiency in service after it unjustifiably rejected a health insurance claim based on policy exclusion clauses that were not applicable to the treatment received by the insured patient Anuradha Narang.
The Commission ruled that merely detecting certain ailments during diagnostic procedures cannot justify rejection of a claim when the actual treatment was for a different illness covered under the policy. The insurer was therefore directed to reimburse the medical expenses along with interest, compensation for mental agony, and litigation costs.
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This decision reiterates the well-established principle that insurance companies cannot rely on exclusion clauses arbitrarily and must prove that the treatment for which reimbursement is sought falls squarely within the excluded category.
Facts of the Case
The complainant had purchased a health insurance policy from the opposite party (OP), which was valid from 19 January 2023 to 18 January 2024. The policy provided a coverage limit of Rs 7.5 lakh. During the validity of the policy, the complainant’s daughter, Ms. Vrinda Narang, experienced severe abdominal pain accompanied by persistent vomiting and dehydration. Due to the severity of her condition, she was admitted to Sir Ganga Ram Hospital on 18 February 2023.
The hospital initially diagnosed her with Acute Gastroenteritis, a condition involving inflammation of the stomach and intestines that often results in vomiting, diarrhea, and dehydration.
The complainant promptly informed the insurer about the hospitalization and applied for cashless treatment under the policy. The insurance company initially granted provisional approval for the treatment and assigned Claim No. CIR/2023/16113/153026.
However, when the patient was discharged on 25 February 2023, the insurer denied the cashless claim. The company alleged that the patient was suffering from ailments such as: Hiatus Hernia, Duodenitis and Haemorrhoids.
According to the insurer, these conditions fell within the two-year waiting period exclusion clause of the policy.
The complainant contested this decision and submitted a clarification letter from the treating doctor, Dr. Anil Arora of Sir Ganga Ram Hospital, which stated that the patient was treated solely for Acute Gastroenteritis and that the other conditions detected during diagnostic procedures were not related to the treatment.
Despite this clarification, the insurer rejected the claim again. Consequently, the complainant issued a legal notice dated 2 March 2023, demanding reimbursement of the hospital expenses amounting to Rs 1,82,000. Although the insurer responded to the notice on 7 March 2023, it refused to reimburse the claim.
Left with no alternative remedy, the complainant filed a complaint before the Consumer Commission seeking “Reimbursement of Rs 1,82,000, Interest at 24% per annum, Compensation of Rs 20,00,000 for mental agony and Litigation expenses of Rs 51,000“
Documents Submitted Before the Commission
To support the claim, the complainant placed several documents on record, including Copy of the insurance policy, Legal notice sent to the insurer, Claim rejection letter, Discharge summary from Sir Ganga Ram Hospital, Medical certificate issued by Dr. Anil Arora and Hospital bills and treatment records.
The medical certificate clearly stated that the patient was treated for Acute Severe Enteritis (Gastroenteritis) and that the other conditions mentioned by the insurer were incidental findings unrelated to the treatment.
Arguments of Parties:
- Insurance Company:
The insurance company contested the complaint and raised several preliminary objections. It argued that the complainant had allegedly concealed material facts, claiming that the insured had certain medical conditions that were not disclosed at the time of obtaining the policy.
However, the insurer did not dispute that the complainant had held the policy continuously since January 2022, which was renewed for the period January 2023 to January 2024.
The insurer further argued that every insurance policy is governed by specific terms, conditions, and exclusions, which are accepted by the policyholder while signing the proposal form.
According to the insurer:
- The patient’s diagnostic reports showed Hiatus Hernia, Duodenitis, and Haemorrhoids.
- These conditions fall under the two-year waiting period clause of the policy.
- Since these conditions were detected within the first two years of the policy, the claim was not payable.
On this basis, the insurer argued that the treatment fell within the exclusion clause, and therefore the claim was rightly denied.
- Contentions of the Complainant
The complainant strongly refuted the insurer’s contentions and clarified that the insurer had misinterpreted the medical reports.
The complainant emphasized that:
- The patient was admitted due to Acute Gastroenteritis, not for Hiatus Hernia or Haemorrhoids.
- The additional conditions were merely incidental findings during diagnostic procedures.
- No treatment, medication, or surgical procedure was administered for those conditions.
The complainant further pointed out that the treatment records and discharge summary clearly indicated that all medical interventions were directed toward treating Gastroenteritis and dehydration. Therefore, invoking the exclusion clause for unrelated conditions was unjustified.
Observations of the Consumer Commission
After hearing the arguments and examining the documents, the Commission made several significant observations.
- Actual Treatment is the Relevant Factor
The Commission held that while the ailments mentioned by the insurer might fall under the exclusion clause, the crucial question was “For which ailment was the patient actually admitted and treated?”
Upon examining the discharge summary and the letter issued by the treating doctor, the Commission found that the patient was treated only for Acute Gastroenteritis. The other conditions detected during diagnostic tests had no connection with the treatment administered during hospitalization.
- Doctor’s Expert Opinion Carries Evidentiary Value
The Commission relied heavily on the medical certificate issued by Dr. Anil Arora, who clarified that:
- The patient was admitted for Acute Severe Enteritis.
- The conditions of Hiatus Hernia and Haemorrhoids were incidental findings.
- No treatment was provided for those ailments.
The Commission noted that the insurer failed to produce any expert medical evidence from another doctor to rebut the opinion of the treating physician.
- Finding of Deficiency in Service
Based on the evidence on record, the Commission concluded that:
- The complainant’s daughter was admitted and treated for Acute Gastroenteritis, which was covered under the policy.
- The ailments cited by the insurer were not the cause of hospitalization.
- No treatment was provided for those conditions.
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Since the insurer failed to establish that the treatment fell within the exclusion clause, the rejection of the claim was held to be arbitrary and unjustified. The Commission therefore ruled that the insurer had committed deficiency in service under consumer protection law.
Final Order and Conclusion
The Consumer Commission allowed the complaint and issued the following directions:
- The insurer must pay Rs 1,81,849 to the complainant towards reimbursement of medical expenses.
- The amount shall carry interest at 9% per annum from the date of filing the complaint until realization.
- The insurer must also pay Rs 20,000 as compensation for mental agony and harassment suffered by the complainant.
- Additionally, the insurer must pay Rs 12,500 towards litigation costs.
The Commission directed that the order must be complied with within 30 days of receipt. If the insurer fails to comply within the stipulated time, the entire amount will carry enhanced interest at 12% per annum from the date of filing the complaint until payment.
This ruling serves as a significant reminder that insurance companies cannot deny claims merely by relying on exclusion clauses without establishing a direct connection between the excluded condition and the treatment provided.
Case Title: Anuradha Narang Vs Star Health and Allied Insurance Co. Ltd
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