In a significant ruling reinforcing consumer protection in the insurance sector, the District Consumer Disputes Redressal Commission, East Delhi, has held Star Health and Allied Insurance Co. Ltd. guilty of deficiency in service for wrongfully denying a mediclaim reimbursement to a policyholder. The Commission ruled that the insurer had failed to establish that the medical treatment fell within the policy’s exclusion clause, thereby rendering the repudiation unjustified.
The decision was delivered by a bench comprising S.S. Malhotra (President) and Ravi Kumar (Member), which allowed the complaint and directed the insurer to honour the claim after finding the repudiation legally unsustainable.
The case arose from a complaint filed by Anuradha Narang, who had purchased a mediclaim policy from Star Health with a coverage of ₹7.5 lakh for the policy period from 19 January 2023 to 18 January 2024.
Shortly after the policy became effective, Narang’s daughter was admitted to Sir Ganga Ram Hospital on 18 February 2023 after experiencing severe stomach pain, persistent vomiting and dehydration. The hospital initially diagnosed the condition as acute gastroenteritis, for which the insurer granted provisional approval for cashless treatment.
However, during the course of medical investigation, diagnostic procedures such as endoscopy and colonoscopy detected conditions including hiatus hernia, duodenitis and small haemorrhoids. On the basis of these findings, the insurer repudiated the claim, invoking a two-year exclusion clause in the policy that excluded coverage for certain ailments during the initial waiting period.
The complainant disputed the rejection, producing a certificate from the treating doctor clarifying that the patient had not been treated for the excluded conditions and that the hospitalization was solely for acute gastroenteritis, which did not fall under the policy’s exclusion clause. Despite this clarification, the insurer maintained its refusal to reimburse the claim.
Aggrieved by the repudiation, the complainant issued a legal notice demanding reimbursement of approximately ₹1.82 lakh, representing the hospitalization expenses incurred during treatment. When the insurer failed to settle the claim, the matter was brought before the District Consumer Commission.
Before the Commission, the insurer argued that the policyholder had allegedly concealed material medical facts at the time of purchasing the policy and that the policy terms explicitly excluded certain gastrointestinal ailments during the first two years of coverage. It relied on diagnostic reports indicating the presence of those conditions to justify the repudiation.
The complainant, however, maintained that the hospitalization was unrelated to the excluded ailments and that the insurer had misapplied the exclusion clause without adequate medical evidence.
After evaluating the evidence on record, the Commission concluded that the insurer had failed to establish a direct nexus between the treatment provided and the diseases listed in the exclusion clause.
The forum observed that merely identifying certain conditions in diagnostic reports cannot automatically justify repudiation of a claim unless it is clearly demonstrated that the hospitalization and treatment were specifically for those excluded ailments.
In the absence of such proof, the Commission held that the insurer’s reliance on the exclusion clause was arbitrary and legally untenable, amounting to deficiency in service under consumer protection law.
The ruling highlights a recurring principle in consumer jurisprudence: insurance companies must strictly justify claim repudiation by establishing that policy exclusions squarely apply to the treatment undertaken. If ambiguity exists regarding the applicability of an exclusion clause, consumer fora have consistently interpreted such clauses in favour of policyholders.
Similar decisions by consumer courts across the country have underscored that insurers cannot rely on technical or loosely interpreted exclusions to deny legitimate claims, particularly when medical evidence indicates otherwise. The order also reflects the broader judicial approach that insurance contracts often drafted by insurers must be construed against the drafter when ambiguity exists, a principle rooted in consumer protection and contractual fairness.
Disputes relating to health insurance claim repudiation have increasingly come before consumer fora in India. Several rulings have emphasised that insurers must act transparently and in good faith while processing claims, especially where policyholders rely on health insurance during medical emergencies.
By holding the insurer liable in the present case, the Delhi Consumer Commission reaffirmed that policy exclusions cannot be invoked mechanically or without clear proof, particularly when doing so deprives consumers of legitimate insurance benefits.
