Wednesday, November 18, 2009

UNDERSTANDING INSURANCE - SOME VIEWS ON PRE EXISTING EXCLUSION IN A MEDICLAIM POLICY


Dear Friends

In a casual discussion with a good friend of mine, a claim under a Policy taken by a person who died within 3 months of inception was discussed. Investigations revealed that deceased was a diabetic for 15 years and had hypo thyrodism for more than 20 years. She had died of heart attack. The death being close to the commencement of policy, investigation is on and how this could turn out was being discussed. I do not have rudimentary experience of handling Health Claims but here are some of my thoughts :

Something of relevance is a recent judgement in Madras High Court by First Bench comprising CJ HL Gokhale and Justice N Paul Vasantha kumar ordering LIC to pay. In the judgment, the Court observed that non-disclosure of certain facts in the proposal will not amount to suppression of material fact. In the impugned case, the assured had taken a policy on 28 1 03 and had died of heart attack within a month. LIC had contended it to be suppression of material fact and LIC had appealed against the decision of Ombudsman. It appears that the deceased had a road accident earlier in June 2001, was an alcoholic (as recorded at the time of accident), a known smoker and a diabetic. In the proposal he had simply given a ‘no’ against these columns which was pleaded to be material.

The LIC submitted that Chezhian met with an accident while riding a two-wheeler and suffered an injury on June 24, 2001. Chezhian, who used to drink alcohol, was under the influence of alcohol at the time of accident. He was also a diabetic and a known smoker. All these facts were not mentioned in the proposal for insurance. The Bench had observed that the accident was not a serious and though the deceased was under treatment for diabetes, he being only 32 was not expected to die of heart attack. The Court directed payment by the Insurers.

Whilst the merits of the judgment can be debated, it is clear that Court has strictly decided on whether the suppression was material to the ailment that caused to death and had ruled in favour of the Insured. As I know, there are standard wordings excluding pre existing diseases :

1) The wording that were used earlier read : “ Pre Existing Disease shall mean any disease, illness, medical condition, injury for treatment of which claim is made under this policy, which existed prior to the Commencement Date of the Policy, or is found by the Insurer, to be of such nature that ought to have existed or begun to set in, prior to Commencement Date of the Policy, whether or not the Insured Person was aware of such disease, illness, medical condition or injury”

2) The wording presently in use reads : “Pre-Existing Condition means any condition, ailment or injury or related condition(s) for which you had signs or symptoms and/or were diagnosed and/or received medical advice/ treatment, within 48 months prior to your first Health Shield Standard Policy with us.”

As is apparent, earlier whatever was pre existing prior to commencement of the Policy or that ought to have existed prior to policy even if the insured was not aware was excluded. Now it is only a condition for which insured had signs or symptoms or diagnosed or received medical advice / treatment within 48 months prior to policy.

The present one is much liberal and am not sure whether the Life companies use a similar wording.

Going by the present trend in interpretations, the exclusion could apply to only those ailment / disease that caused the death and was pre existing but not to those which could have caused. Thus is the cause was ‘heart attack’ and if the deceased had symptoms / diagnosis / treatment for heart attack earlier to policy, then it would be outside the purview. But the insured being a diabetic or having hyper tension but died of heart attack would not an exclusion unless direct relation between the heart attack and the pre existing ailment could be proved.

Look forward to feedback from Experts.

With regards
S Sampathkumar


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