• Policyholder Concealed Drinking Habit, Court Rules in LIC’s Favor
• False Declarations Can Cost Policyholders Their Claims
Unmesh Gujarathi
Sprouts News Exclusive
In a significant ruling that could reshape health insurance claim policies, the Supreme Court has upheld the rejection of a health insurance claim for alcohol-related hospitalization. The apex court ruled that insurance companies have the right to deny claims if the policyholder deliberately suppresses their drinking habit while purchasing the policy.
The case involved a policyholder who was insured under the Jeevan Arogya scheme of Life Insurance Corporation (LIC). The individual was later hospitalized due to health complications arising from excessive alcohol consumption. However, during the policy application process, the insured person had falsely declared that they were not a habitual drinker.
When the claim was submitted, LIC found that the hospitalization was directly linked to alcohol-related ailments, contradicting the information provided in the policy application. Consequently, LIC rejected the claim, citing “suppression of material facts.” The policyholder’s family challenged this decision in court, arguing that the insurer was unfairly denying coverage.
Also Read: Gold, Lies, and Dubai: The Ranya Rao Scandal
• Supreme Court’s Verdict
A Supreme Court bench, after reviewing the case, ruled in favor of LIC, stating that suppression of crucial health-related information—such as alcohol consumption—justifies the rejection of an insurance claim. The court emphasized that insurers base their risk assessment on the information provided by applicants, and any misrepresentation directly impacts the validity of the policy.
“When an individual suppresses a material fact such as habitual alcohol consumption, it affects the risk assessment undertaken by the insurer. Health insurance policies are structured based on the declared lifestyle habits of the insured, and any false representation can lead to the repudiation of claims,” the court observed.
The ruling reinforces the principle that insurance is a contract of utmost good faith (uberrima fides), where both parties must disclose all relevant information truthfully. Any deviation from this principle provides the insurer with a legitimate ground to deny a claim.
• Implications of the Judgment
This verdict has far-reaching implications for both policyholders and insurance companies:
1. Increased Due Diligence by Insurers – Insurance companies may now implement stricter verification processes to ensure applicants accurately disclose lifestyle habits.
2. Greater Awareness for Policyholders – The ruling serves as a warning that false declarations can lead to claim rejection, emphasizing the need for transparency while purchasing insurance.
3. Stronger Legal Precedent – The judgment sets a benchmark for future cases, allowing insurers to deny claims if misrepresentation is proven.
• Industry Reactions
Experts from the insurance sector have welcomed the ruling, stating that it upholds the integrity of insurance contracts. A senior executive from LIC remarked, “This decision strengthens the foundation of fair underwriting practices and ensures that genuine policyholders are not burdened with fraudulent claims.”
However, consumer rights activists have expressed concerns, arguing that insurers might misuse the ruling to deny legitimate claims. They urge regulatory bodies like the Insurance Regulatory and Development Authority of India (IRDAI) to establish clearer guidelines on what constitutes material non-disclosure.
• The Supreme Court’s verdict is a wake-up call for policyholders to be honest in their disclosures and for insurers to maintain fair assessment practices. As health insurance policies continue to evolve, this landmark ruling will likely shape the industry’s approach to claim assessments, ensuring a balance between policyholder rights and insurer protections.