Ernakulam District Commission: Courts Should Lean Towards the Complainant When Two Interpretations of the Same Clause Exist

The Ernakulam District Commission, chaired by Shri. D.B. Binu, Shri. V. Ramachandran, and Smt. Sreevidhia T.N., found Star Health & Allied Insurance responsible for service deficiency and unfair trade practices. The commission emphasized that insurance coverage clauses should be interpreted liberally, with any uncertainties resolved in favor of the policyholder.

Case Overview

The complainant held a health insurance policy with Star Health & Allied Insurance, providing coverage up to Rs. 2,00,000. Following an accident, he was admitted to a network hospital and expected cashless treatment. However, the hospital demanded additional documents like an initial consultation report, MRI, and X-ray, which the attending physician deemed unnecessary. Despite submitting all required medical bills and records, the insurer denied the claim citing non-submission of these documents.

The complainant lodged a complaint with the District Commission, seeking Rs. 2,20,000 in total, which included Rs. 1,20,000 for hospitalization expenses, Rs. 50,000 as compensation for inconvenience caused, and litigation costs.

Arguments Presented by the Insurer

The insurer disputed the complainant’s assertions, confirming that the complainant held a health insurance policy worth Rs. 2,00,000. They stated that the complainant was informed about the requirement to furnish necessary documentation for claims. Upon receiving a pre-authorization request for cashless treatment, the insurer requested specific documents, including an initial consultation report and MRI results. Allegedly, the complainant failed to provide these documents, resulting in the denial of the cashless treatment request. Subsequently, the insurer rejected the claim post-discharge due to the absence of the required documents, as stipulated under Policy Condition No. 4. The insurer contended that there was no deficiency in service or unfair trade practice, disputed the claimed hospitalization expenses of ₹1,20,000, and argued that any liability should be limited to ₹95,286, excluding non-medical expenses. They further asserted that the complaint appeared frivolous and aimed at unjust enrichment.

Findings of the District Commission

The District Commission noted that the insurer’s refusal to process the claim, despite receiving extensive documentation and certification from the attending physician, indicated a significant lapse in service quality. The mental distress and physical inconvenience suffered by the complainant further underscored this finding. Citing the Supreme Court’s decision in Canara Bank vs. United India Insurance Co. Ltd. & Ors., the Commission emphasized that insurance policies should be interpreted holistically to meet the reasonable expectations of all parties, particularly the insured. It stressed the need to interpret coverage clauses liberally, resolve ambiguities in favor of the insured, and narrowly construe exclusion clauses.

Applying these principles, the Commission deemed the insurer’s denial of the claim on procedural grounds and unnecessary documentation demands as unjustified and constituting unfair trade practices. Despite discrepancies in the records regarding the accident date, the Commission concluded that such discrepancies should not overshadow the core issue. It highlighted the courts’ responsibility to meticulously scrutinize all evidence and make informed decisions, particularly favoring consumers when multiple interpretations are plausible.

In its final assessment, the Commission held the insurer liable for service deficiencies and unfair trade practices. The insistence on unnecessary documentation had exacerbated the complainant’s distress and hardship, reflecting a lack of empathy and fairness.

As a result, the District Commission upheld the complaint against the insurer, ordering them to reimburse the complainant Rs. 1,72,696 for the insurance claim. Additionally, the insurer was instructed to compensate Rs. 20,000 for service deficiencies, unfair trade practices, and the mental distress caused, along with Rs. 15,000 to cover the legal expenses.

Case Title: Saneesh M.S. Vs. Star Health & Allied Insurance Company Ltd.

Case Number: C.C. No. 153/2020

Posted and reproduced in Public Interest by

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