Introduction
The Jammu and Kashmir High Court ruled that insurance companies cannot reject claims solely based on exclusion clauses unless they provide proper justification. If medical experts determine hospitalization is necessary, insurers must honor the claim.
Case Background
A policyholder filed a consumer complaint against National Insurance Co. Ltd. for rejecting his Mediclaim insurance reimbursement. The policy, valid from February 24, 2005, to February 23, 2006, covered his hospitalization expenses for major depressive disorder and schizophrenia. The insurer denied the claim, citing Clause 4.8, which excluded psychiatric and outpatient treatments.
The Divisional Consumer Forum dismissed the respondent’s complaint, siding with the insurer. However, on appeal, the Jammu & Kashmir State Consumer Disputes Redressal Commission reversed the decision, ordering reimbursement of ₹2,26,322 with 8% interest and additional damages of ₹30,000. National Insurance Co. Ltd. then challenged this ruling before the High Court.
Petitioner’s Stance
The insurer argued that the claimant could have been treated as an outpatient, which would exclude him from coverage. It also maintained that psychiatric conditions were explicitly excluded under the policy.
Court’s Ruling
A bench of Justices Sanjeev Kumar and Moksha Khajuria Kazmi held that the insurer failed to prove that hospitalization was unnecessary. The court emphasized that the medical expert’s report contradicted the insurer’s claim and confirmed the necessity of inpatient care.
Additionally, the court rejected the insurer’s assertion that the respondent was hospitalized due to drug addiction, which would have disqualified him under the policy. Since no substantive evidence supported this claim, the insurer’s argument was dismissed.
Final Verdict
The High Court upheld the Commission’s decision to reimburse ₹2,26,322 with 8% interest. However, it relieved the insurer from paying the ₹30,000 in damages awarded by the consumer forum. It directed the Registry to release ₹3,45,216, deposited by the insurer before the court, in favor of the respondent, excluding the damages.
This ruling reinforces that insurers cannot deny legitimate claims without strong justification, particularly when medical professionals determine hospitalization is necessary.
