Insurers can deny claim over hiding drinking habit, says SC
The insurer pointed to an exclusion clause that denied coverage for ‘self-inflicted conditions’ and ‘complications arising from the misuse of alcohol’
The claims of people who drink alcohol but keep it a secret from their insurance companies could be rejected -- even if the death was not directly caused by alcoholism. The Supreme Court has ruled that insurers are within their rights to repudiate claims if policyholders conceal their drinking habit while buying health insurance.
A bench of justices Vikram Nath and Sandeep Mehta upheld the Life Insurance Corporation’s (LIC) decision to deny a claim under its Jeevan Arogya policy to a man who took the policy in 2013 but failed to disclose that he was a chronic alcoholic. Less than a year later, he was hospitalised in Jhajjar, Haryana for severe abdominal pain, remained under treatment for nearly a month, and ultimately died of a cardiac arrest.
His widow, who filed for hospitalisation benefits, was in for a shock when LIC refused to pay the medical expenses citing the fine print of the policy. The insurer pointed to an exclusion clause that denied coverage for “self-inflicted conditions” and “complications arising from the misuse of alcohol”. Since the man explicitly stated in his policy application that he did not consume alcohol, LIC argued that the suppression of this fact was enough to nullify his claim.
She pursued legal remedies, and the district consumer forum initially ruled in her favour, directing LIC to pay ₹5.21 lakh along with costs. The state consumer commission and the national consumer commission upheld this decision on the grounds that while the deceased was suffering from diabetes mellitus and chronic liver disease at the time of hospitalisation, his death was due to cardiac arrest, which was not directly linked to the pre-existing ailments.
LIC, through advocate R Chandrachud, approached the Supreme Court, which saw things differently. In its decision earlier this month, the bench pointed out that this was not a case of simple medical reimbursement, where hospital bills automatically translate into payouts, but a fixed cash benefit policy where entitlement was conditional upon the terms agreed upon at the time of policy subscription. It emphasised that the insurer actively misrepresented his medical history -- an act that had direct consequences under the policy’s terms.
The medical records, the top court noted, made it clear that the man had a history of “chronic alcohol intake”. This was not a case of casual drinking but a sustained pattern of consumption that contributed to his deteriorating health, noted the bench.
It rejected the argument that this was only discovered after the policy was issued didn’t hold water. “Chronic liver disease due to alcohol consumption doesn’t develop overnight,” held the court. The fact that he hid this from LIC was sufficient to justify the rejection of his claim.
The bench also dealt with a key precedent in insurance law -- Sulbha Prakash Motegaoneker vs LIC (2015), where the Supreme Court ruled that simply suppressing a pre-existing disease cannot always become a ground for rejection of insurance claim. But the bench pointed out a crucial distinction -- in the Sulbha Prakash case, the undisclosed ailment had no connection to the cause of death. However, in the present case, the insurer’s history of alcoholism had led to chronic liver disease, which in turn contributed to his death.
Though LIC has already paid ₹3 lakh to the man’s widow following the consumer court’s directions, the Supreme Court stopped short of asking for the money to be returned, considering her financial condition.