Star Health and Allied Insurance Company Ltd. v. Byju S. and Insurance Ombudsman

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **THURSDAY, THE 11TH DAY OF JULY 2019 / 20TH ASHADHA, 1941** ## **WP(C).No.9414 of 2016** ## **PETITIONER/S:** **STAR HEALTH AND ALLIED INSURANCE COMPANY LTD., REGD. AND CORPORATE OFFICE AT 1, NEW TANK STREET, VALLUVAR KOTTAM HIGH ROAD, NUGAMPAKKAM, CHENNAI, 600034, REPRESENTED BY ITS GENERAL MANAGER, SRI. USHA CHANDRASEKHARAN, ZONAL OFFICE, 4TH FLOOR, CARMAL TOWERS, COTTON HILL. P.O., VAZHUTHACAUD, THIRUVANANTHAPURAM.** ## **BY ADV. SRI.R.S.KALKURA** ## **RESPONDENT/S:** **1 SRI. BYJU S., AGED 49 YEARS, PLAVILA VEEDU, THAZHAMEL, ANCHAL.P.O., KOLLAM DISTRICT-691 306. 2 THE INSURANCE OMBUDSMAN, PULLINAT BUILDING, 2ND FLOOR, OPP. COCHIN SHIPYARD, M.G.ROAD, ERNAKULAM, KOCHI-682 015.** **BY ADVS. R1 - SRI.BIMAL K.NATH SMT.DIVYA C BALAN SMT.M.K.SHIMI SRI.D.SREENATH SRI.SREEVALSAN.V** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11.07.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.9414 of 2016 2 ## **C.R.** ## **JUDGMENT** This writ petition is filed by the petitioner Insurance Company, challenging Ext.P11 award passed by the Insurance Ombudsman, Kochi in Complaint No.KOC-G044-1415-0003, directing the petitioner to pay an amount of Rs.1,00,000/- towards ex-gratia to the 1[st] respondent claimant, though the Ombudsman found that there was material suppression of facts, and therefore, the contract entered into by and between the petitioner and the 1[st] respondent is null and void. Brief Material facts for the disposal of the writ petition are as follows: 2. The 1[st] respondent had taken a Basic Floater Star Health Medi-claim Policy from the petitioner. The coverage of the policy was from 22.10.2012 to 21.10.2013 for an amount of Rs.3,00,000/-. Petitioner issued the policy to the 1[st] respondent based on Ext.P2 proposal submitted by the 1[st] respondent. The declaration contained in the proposal form clearly stipulated that, in case it is found that the statements or answers given by the insured are found W.P.(C) No.9414 of 2016 3 incorrect or false, the company would be absolved from any liability. Therefore, the acceptance of the proposal is purely on the basis of the information submitted by the customer, after the company deems that the risks can be covered. It is also pointed out that, if the health condition is not satisfactory or enumerate high risk, the company will not issue a policy, and if the person is submitting incorrect information to mislead the insurer to issue a policy, the same is treated as fraud. 3. The 1[st] respondent raised a claim for medical benefit of Rs.2,11,608/-, which was repudiated by the company as per Ext.P6 order. Thereupon, 1[st] respondent has preferred a representation before the Grievance Cell of the petitioner company, which was also dismissed as per Ext.P8 order. It was thus accordingly 1[st] respondent approached the Insurance Ombudsman and secured the order for ex-gratia payment of Rs.1,00,000/-. 4. I have heard learned counsel for the petitioner and the learned counsel appearing for the 1[st] respondent, and perused the pleadings and the documents on record. W.P.(C) No.9414 of 2016 4 5. The case put forth by the 1[st] respondent is that, in January, 2013, he had suffered heart pain and was admitted to two hospitals, i.e., Upasana Hospital and for further investigations in NIMS Hospital. The admission was intimated to the petitioner company, according to the 1[st] respondent, the insurer has assured that the claim would be sanctioned soon. However, _vide_ letter dated 29.08.2013, it was informed that the claim was repudiated. 6. The paramount contention advanced by the petitioner company before the Ombudsman was that the policy was issued based on the declarations given in the duly signed proposal form, subject to certain terms and conditions executed by and between the parties. The complainant was admitted to NIMS Hospital for treatment of IHD, T2DM, HTN from 29.01.2013 to 31.01.2013. The pre-authorization request received from the hospital on 29.01.2013, clearly revealed in the medical history column that 1[st] respondent was suffering from DM since one year. Since there was preexisting illness, the cashless benefit was denied. After treatment, the bills were submitted, which was W.P.(C) No.9414 of 2016 5 repudiated. The discharge summary further reveals that the 1[st] respondent is a known case of T2DM and on treatment for Dyslipidemia. The risk factors recorded by the treating doctor include, T2DM, Dyslipidemia, Smoking etc. As part of the claims processing protocol, the company arranged investigation and collected records from the hospitals. The records from NIMS Hospital revealed that the 1[st] respondent was suffering from DM since 8 years. The records from Upasana Hospital revealed that 1[st] respondent was suffering from T2DM for last 8 years and HTN since 5 years. Therefore, according to the petitioner, these facts having not disclosed in the proposal form, amounts to material suppression of facts, and the contract entered into by and between the parties is _ab initio_ void. 7. On the other hand, learned counsel appearing for the 1[st] respondent submitted that, there is no interference required in the order passed by the Ombudsman, since the Ombudsman is vested with ample powers under Rule 18 of the Redressal of Public Grievances Rules, 1998, to make ex-gratia payment, and if the Ombudsman deems fit, he may award an ex-gratia payment. W.P.(C) No.9414 of 2016 6 8. However, learned counsel appearing for the petitioner submitted that, the Ombudsman having found that there was material suppression of facts and the contract was found to be null and void, the Ombudsman was not entitled to order ex-gratia payment of Rs.1,00,000/-. That apart, it is pointed out that, no reasons are assigned by the Ombudsman in order to award the ex-gratia payment. Therefore, the discretion exercised by the Ombudsman itself is baseless. 9. Learned counsel in that regard has invited my attention to the judgment of the apex court in ' _**GMG Engineering Industries v. ISSA Green Power Solution**_ ' [2015 (3) KLT SN 10 (C.No.13) SC]. So also, a Division Bench judgment of this Court in ' _**Omana Mathai v. Joseph Easo**_ ' [2014 (1) KLT 689] is pressed into service. Culling out the principles laid down in the aforesaid judgments, it is clear that the discretion is to be exercised by any authority like any other judicial discretion with vigilance and circumspection, and the discretion is not to be exercised in any arbitrary, vague or fanciful manner. In the Division Bench judgment referred to above, it is held that the W.P.(C) No.9414 of 2016 7 judicial act has to be expressed by stating the reasons which would be discernible from the judgment by a Court of appeal if a party were to carry an appeal against the judgment. Therefore, according to learned counsel for the petitioner, none of the basic principles of law that should have been followed by the Insurance Ombudsman, a quasi-judicial functionary, were undertaken in the matter of exercising the discretion. 10. Having evaluated the rival submissions made across the Bar, and the legal and factual situations, it is clear that, there was material suppression which was found so by the Ombudsman, in the matter of submitting the proposal. That finding rendered by the Ombudsman is not assailed by the 1[st] respondent. Therefore, the sole question to be considered is, whether the ex-gratia payment of Rs.1,00,000/- ordered by the Ombudsman can be sustained under law. As is contended by learned counsel for the petitioner, there is no reason at all assigned by the Ombudsman for granting the ex-gratia payment. True, power is vested to grant ex-gratia payment, under Rule 18, but when amounts are awarded under that head, it should be supported by reason. Here, in the case on hand, Ombudsman has not stated, how, why, and under what W.P.(C) No.9414 of 2016 8 circumstances the discretion was exercised. When a power of discretion is conferred upon a statutory authority or a judicial forum, that should be exercised with care, caution and circumspection, and in a judicious manner. If only reasons are assigned by the authority, an appellate or judicial forum will be in a position to evaluate the manner in which the power was exercised in order to arrive at a just conclusion. However, in the case on hand, Ombudsman basically found that, the contract of policy issued is _ab initio_ void, consequent to the illegal conduct on the part of the 1[st] respondent not disclosing the true and material facts, which forms the foundation for issuance of the policy. Above all, on a reading of Rule 18, it is explicit that only if it deems fit, the ex-gratia may be awarded, which thus means, the authority was duty bound to explain the circumstances leading to the fitness of things enabling it do so. Having not done so, the substratum with respect to exercise of the discretionary power vanishes. In that view of the matter, the award of ex-gratia payment of Rs.1,00,000/cannot be sustained under law. Normally, the said issue ought to have been remanded for _de-novo_ consideration, but several years have elapsed and the W.P.(C) No.9414 of 2016 9 issue can be sorted out here itself, verifying the pleadings and available records. 11. In my considered view, since there was power vested with the Ombudsman under Rule 18 of the Rules specified above, the maximum that the Ombudsman could have done is, it ought to have directed the Insurance company to return the premium paid by the 1[st] respondent amounting to Rs.11,340/-, since normally, the proposal forms are given by the Insurance Agents and the entries therein are also filled up by them. Thereafter, before entering the contract on the basis of the information given by the party in the proposal form, a medical check up would be conducted, and it is thereafter alone, the policy is issued by the Insurance company. Therefore, if any pre-existing condition was found in the normal medical check up, the policy would not have been issued by the company. Since the policy is issued after obtaining the proposal form and the medical check up, I am of the considered opinion that, the Insurance company is liable to return the premium paid as specified above to the 1[st] respondent. Therefore, the writ petition is allowed to that extent, and Ext.P11 award is modified granting ex-gratia of Rs.11,340/- and accordingly, the W.P.(C) No.9414 of 2016 10 petitioner Insurance company is directed to pay the said amount of Rs.11,340/- to the 1[st] respondent as ex-gratia, within a month from the date of receipt of a copy of this judgment. ## **Sd/-** ## **SHAJI P.CHALY** **JUDGE** St/12.07.2019 W.P.(C) No.9414 of 2016 11 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1** **TRUE COPY OF THE POLICY DATED 22.10.2012 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT.** - **EXHIBIT P2 TRUE COPY OF THE PROPOSAL FORM SUBMITTED BY THE 1ST RESPONDENT.** - **EXHIBIT P3 TRUE COPY OF THE LETTER DATED 31.1.2013 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT.** - **EXHIBIT P4 TRUE COPY OF THE CLAIM FORM DATED 29.1.2013 SUBMITTED BY THE 1ST RESPONDENT BEFORE THE PETITIONER.** - **EXHIBIT P5 DISCHARGE SUMMERY DATED 31.1.2013 ISSUED BY NIMS HEART FOUNDATION.** - **EXHIBIT P6 TRUE COPY OF THE LETTER DATED 28.8.2013 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT.** - **EXHIBIT P7 TRUE COPY OF THE REPRESENTATION DATED 7.11.2013 SUBMITTED BY THE 1ST RESPONDENT BEFORE THE GRIEVANCE CELL OFFICER.** - **EXHIBIT P8 TRUE COPY OF THE LETTER DATED 14.11.2013 ISSUED BY THE CLAIM REVIEW COMMITTEE TO THE 1ST RESPONDENT.** - **EXHIBIT P9 TRUE COPY OF THE COMPLAINT DATED 2.4.2014 FILED BY THE 1ST RESPONDENT BEFORE THE 2ND RESPONDENT.** - **EXHIBIT P10 TRUE COPY OF THE OBJECTION STATEMENT FILED ON BEHALF OF THE PETITIONER.** - **EXHIBIT P11 A TRUE COPY OF THE AWARD DATED 3.12.2014 PASSED BY THE 2ND RESPONDENT.** - **RESPONDENTS' EXHIBITS: NIL** **//TRUE COPY//** **P.S. TO JUDGE** **St/-**