Kerala High Court: In two writ petitions filed against the partial denial and subsequent complete rejection of insurance claims by the Life Insurance Corporation of India (‘LIC’), the petitioners sought to quash the impugned rejection orders. The Single Judge Bench of P.M. Manoj, J. held that the denial of insurance claims for necessary medical treatment constitutes a violation of the right to life under Article 21 of the Constitution of India.
Background
The petitioner had availed a LIC Health Plus Plan, effective from 31-03-2008 and valid until 31-03-2024, covering himself, his wife, and two children. His wife was hospitalized from 12-04-2016 to 22-04-2016, following which the petitioner submitted a claim of ₹60,093 on 02-05-2016. However, the insurance company sanctioned only ₹5,600, citing that the policy benefits were fixed and not directly related to actual expenses incurred. This led to the filing of a writ petition challenging the partial settlement.
Subsequently, the petitioner’s wife underwent further treatment from 01-08-2016 to 24-08-2016 at Vedanayagam Hospital, incurring an expense of approximately ₹1,80,000. A second claim was submitted on 22-09-2016. However, this claim was entirely rejected by the insurer, citing a pre-existing condition, hernia surgery conducted in 2006, prior to the policy’s commencement. The insurer alleged suppression of material facts and relied on exclusions under Clause 6 of the policy terms.
The petitioner contended that the previous hernia surgery was unrelated to the current treatment for vesicovaginal fistula repair and challenged the rejection orders through another writ petition. The insurer, in its counter, maintained that the claim did not meet the policy’s criteria for major surgical benefit and that the policy functioned on pre-fixed benefits, not expense reimbursement. It also invoked the principle of uberrima fides (utmost good faith) to allege material non-disclosure by the petitioner.
Analysis and Decision
The Court, on a preliminary assessment of the contentions, deemed it necessary to examine the maintainability of the writ petitions, invoking its jurisdiction under Article 226 of the Constitution only with caution, given that insurance disputes are ordinarily matters for civil courts due to their contractual nature.
However, the Court noted that Article 226 jurisdiction can be exercised in exceptional situations, particularly when:
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The dispute appears bona fide,
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The case does not require oral evidence,
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There is violation of fundamental rights or natural justice, or
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There has been a gross miscarriage of justice.
In the present case, the petitioner had subscribed to LIC’s Health Plus Plan, which covered hospitalisation expenses for himself and family members. His claims, first for ₹60,093 (partly settled at ₹5,600) and later for ₹1,80,000, were either underpaid or rejected, the latter on grounds of an alleged pre-existing condition (hernia repair surgery from 2006).
The Court observed that:
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The insurer failed to justify limiting the initial claim.
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The vesicovaginal fistula for which treatment was sought is unrelated to prior hernia surgery.
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The policy did not clearly exclude such treatment, even though urinary tract ailments were partly covered.
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The rejection citing pre-existing illness was misplaced and amounted to denial of rightful claim.
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The facts were bona fide and required no oral evidence for adjudication.
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The right to medical treatment is part of the fundamental right to life under Article 21, and denial of a legitimate claim amounts to a violation of that right.
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The rejections were issued without affording sufficient opportunity to the insured to explain, thus breaching the principles of natural justice.
The Court referenced precedents including Paschim Banga Khet Mazdoor Samithi v. State of West Bengal, 1996 (4) SCC 37 and Consumer Education and Research Centre v. Union of India, 1995 (3) SCC 42, affirming that healthcare access and insurance coverage are constitutionally protected under Article 21.
The Court, invoking Article 226 of the Constitution, held that although insurance matters are generally contractual and suited for civil courts, writ jurisdiction is maintainable where there is a gross miscarriage of justice, violation of fundamental rights, or breach of natural justice. The Court found that the insurer failed to afford the insured an opportunity to be heard before rejecting the claims, amounting to a violation of the principles of natural justice. Moreover, it held that the alleged pre-existing condition was unrelated to the illness treated, and there was no evidence of fraudulent suppression.
Relying on the Supreme Court decision in LIC v. Asha Goyal, (2001) 2 SCC 160 and Section 45 of the Insurance Act, 1938 (pre-amendment), the Court emphasised that no policy can be repudiated after two years from inception unless clear fraud is proven. Since the policy had been in force for over eight years before the claims arose, the repudiation was contrary to the statutory protection under Section 45. The Court concluded that the insurer’s action was arbitrary and legally unsustainable.
The Court examined the denial of a health insurance claim by the insurer on the ground of non-disclosure of a pre-existing condition, hernia repair in 2006 in relation to a claim made in 2016 for treatment of vesicovaginal fistula. The Court held that the claim was governed by the unamended Section 45 of the Insurance Act, 1938, which prohibits repudiation of an insurance policy after two years from the date of issuance, except in cases of deliberate fraud involving material facts. The policy was issued in 2008 and the claim raised in 2016, well beyond the two-year statutory window. The insurer failed to establish any wilful suppression or fraudulent intent, and no medical nexus was shown between the pre-existing hernia condition and the illness treated under the claim. Thus, the conditions necessary to invoke Section 45 were not met.
The Court further observed that there was no specific allegation of fraud under Clause 22(xi) of the policy, and mere reference to a past ailment, without establishing its materiality or connection to the present treatment, was insufficient to justify repudiation. Reiterating that insurance is a contract of utmost good faith, the Court underscored that repudiation is valid only if the omitted information would have influenced a prudent insurer’s decision at the time of underwriting the risk. In this case, such a link was absent.
Relying on the principle of contra proferentem, the Court emphasised that any ambiguity in policy terms must be interpreted against the insurer, especially in standard form contracts where the insured has limited bargaining power or technical understanding. The Court also applied the doctrine of reasonable expectation, holding that policyholders, having paid premiums consistently, reasonably expect coverage for medically necessary treatments, not just those exhaustively listed in a surgical annexure. To restrict claims only to listed procedures without medical justification would defeat the very object of health insurance.
The judgment was critical of public sector insurers, particularly Life Insurance Corporation of India (‘LIC’), for repudiating claims on technical or trivial grounds. The Court noted that such actions undermine public trust and the social welfare objective of health insurance. It concluded that insurance contracts must be interpreted to advance their protective purpose, not to defeat it through narrow or arbitrary exclusions.
Accordingly, the Court found that the repudiation of the claim was legally unsustainable, contrary to Section 45 of the Insurance Act, violative of principles of natural justice, and inconsistent with settled jurisprudence.
The Court emphasised that it is the bounden duty of the insurer to seek clarification on any doubtful or contradictory entries in the proposal form prior to policy issuance. Failure to do so amounts to a waiver of objections and estops the insurer from later repudiating claims based on such ambiguities. The evidence on record, particularly the checklist submitted a showed that the insurer had not fulfilled this duty. The doctrine of uberrima fides (utmost good faith), while binding upon the insured, equally applies to the insurer, especially in cases involving complex health coverage. The insurer had a legal and moral obligation to transparently disclose the scope of surgical benefits, which it failed to do, thereby breaching the insured’s legitimate expectations.
By continuing to accept premiums for several years, the insurer created a reasonable expectation of coverage and is estopped from later denying the claim based on unclear or undisclosed exclusions. The Court acknowledged its consultation with medical professionals to better understand the medical context and implications of the case, ensuring an informed adjudication.
Taking into account the broader public interest and the growing trend of arbitrary repudiation of claims by both public and private insurers, the Court held that judicial intervention was warranted. It determined that the denial of the claim lacked legal sustainability and violated the principles of natural justice, good faith, and fair disclosure.
Accordingly, the Court quashed the impugned orders and directed the insurer to honour the claim without any further delay, noting that the policy remained valid until 31-03-2024.
[Dr. AM Muraleedharan v. Senior Divisional Manager, 2025 SCC OnLine Ker 8566, decided on 08-09-2025]
Advocates who appeared in this case:
For Petitioner: R.Parthasarathy,B.Krishnan
For Respondents: S. Lakshmy
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