Consumer Loses Case Against Health Insurance Due to Non-Disclosure of Pre-Existing Disease

A recent decision of the District Consumer Disputes Redressal Commission, Ranga Reddy (Order dated 17 April 2025), highlights the importance of full and accurate disclosure while purchasing a health insurance policy. The complainant’s claim for reimbursement was rejected, the policy was cancelled, and ultimately, the consumer’s case was dismissed. This article provides a detailed, factual analysis of the judgment.

All original names have been replaced for privacy.

Case Background

Mr. Raghav Sharma (name changed), a 50-year-old software engineer residing in Meerpet, Hyderabad, purchased a family health insurance policy from HDFC ERGO on 29 September 2020. The insured persons under the policy were:

  • Anita Sharma (spouse)
  • Pallavi Sharma (daughter)
  • Kavya Sharma (younger daughter, aged 4 at the time of the incident)

The policy sum insured was Rs. 3,00,000.

First Hospitalization – Claim Approved

On 3 June 2021, Kavya was admitted to Rainbow Children’s Hospital, Banjara Hills, Hyderabad.
A cashless claim of Rs. 18,000 was approved and settled by HDFC ERGO.

Second Hospitalization – Claim Rejected

On 10 November 2021, Kavya was again hospitalized at the same hospital with a bill of Rs. 52,043.

This time:

  • The cashless request was rejected.
  • Mr. Raghav paid the bill through his credit card.
  • He applied for reimbursement as advised by customer care.
  • After scrutiny, the insurer rejected the reimbursement claim.
  • The insurer also cancelled the entire policy.

The rejection letter stated that the child was a known case of Nephrotic Syndrome since August 2020, which was prior to policy inception and was not disclosed in the proposal form.

Complainant’s Claim

Before the Consumer Commission, the complainant sought:

  • Reimbursement of Rs. 52,043 with 2% interest
  • Compensation of Rs. 5,00,000 for mental agony

He appeared as a party-in-person (without an advocate).

Insurance Company’s Defence

HDFC ERGO filed a written version stating:

  1. The complaint is not maintainable because it did not allege any deficiency in service.
  2. The child’s discharge summary clearly mentioned that she was a known case of Nephrotic Syndrome, with two relapses, the last one in August 2020.
  3. The disease existed before the policy was purchased on 29 September 2020.
  4. The complainant did not disclose this medical history in the proposal form (Ex.B5).
  5. As per policy terms and IRDAI regulations, non-disclosure of material facts authorizes cancellation of the policy and repudiation of the claim.
  6. The insurer had acted strictly according to the terms and conditions and there was no deficiency on its part.

The company relied on Supreme Court precedents, including Reliance Life Insurance Co. vs. Rekhaben Rathore and Satwant Kaur Sandhu vs. New India Assurance, which uphold the principle of utmost good faith in insurance contracts.

Commission’s Analysis

1. Absence of Allegation of Deficiency in Service

The Commission noted that the complainant’s petition did not contain any allegation of:

  • Deficiency in service
  • Unfair trade practice

Consumer Fora operate strictly under the Consumer Protection Act. Without explicitly alleging deficiency, the complaint itself becomes legally defective.

2. Proven Non-Disclosure of Pre-Existing Disease

The Commission examined:

  • Discharge summary dated 05 June 2021 (Ex.B2)
  • Hospital records
  • Policy documents
  • Proposal form

All documents confirmed:

  • Kavya had Nephrotic Syndrome before policy inception.
  • This condition was not disclosed in the policy proposal.
  • The second hospitalization was directly related to the same condition.

3. Insurer’s Decision Was Justified

The Commission agreed that:

  • The complainant had a duty to disclose all material medical facts.
  • Non-disclosure allowed the insurer to cancel the policy and reject claims.
  • HDFC ERGO followed the policy terms and IRDAI norms.

There was no deficiency in service.

Final Order

Complaint Dismissed in Full

The Commission dismissed the consumer complaint with no costs, holding that:

  • The insurer acted within the policy terms
  • There was clear non-disclosure of a pre-existing disease
  • The complaint lacked necessary legal allegations

Key Takeaways

  1. Non-disclosure of pre-existing diseases leads to valid claim rejection.
  2. Even for a child, all medical history must be disclosed truthfully.
  3. A properly drafted complaint must allege deficiency in service.
  4. Medical documents submitted by hospitals form strong evidence.
  5. Insurers can cancel a policy from inception if material facts are concealed.
  6. Consumer Courts will dismiss cases if evidence supports the insurer.