New Delhi: In a recent verdict, the Supreme Court ruled that health insurers have valid grounds to repudiate or reject any health-insurance claims that stem from alcoholism if the individual did not explicitly disclose that they consume alcohol while buying the insurance policy.
In this case, the apex court held LIC’s (Life Insurance Corporation) claim to reject an individual’s hospitalization claim under their now-discontinued Jeevan Arogya scheme (a health insurance benefit-based policy) since he had not apprised LIC of his chronic alcoholism.
The Supreme Court upheld the decision of the LIC to repudiate a claim over the hospitalisation of a policyholder under the “Jeevan Arogya” scheme since he gave false information regarding his habit of alcohol consumption. The individual had remained hospitalized for nearly a month after complaining of severe abdominal pain before succumbing to a cardiac arrest.
“The deceased provided false information in the proposal form. The relevant question in the form asked, “Does the life insured consume alcohol/cigarettes/bidis/or tobacco in any form?” The deceased answered, “No.” The policy was issued based on this declaration. However, evidence on record establishes that the deceased was a chronic alcoholic. This fact was not disclosed at the time of obtaining the policy,” the judgment noted.
Complete disclosure on behalf of the policyholder becomes all the more important under schemes such as Jeevan Arogya since they are issued under a Non-Medical General Scheme, i.e., where no medical examinations are conducted before issuing a policy.
Lower courts and dispute redressal commissions approached by the aggrieved’s wife had rejected the aforementioned hospital note regarding the policyholder’s chronic alcohol intake because the LIC policy had been purchased a year that it was issued a year after the policy was taken.
However, in the words of the Supreme Court, “chronic liver disease, caused by prolonged alcohol consumption, does not develop overnight. The deceased’s alcoholism was a longstanding condition, which he knowingly suppressed while subscribing to the policy. Given this suppression of material facts, the appellant was justified in repudiating the claim under the exclusion clause.”
Notably, clause 7(xi) of the Jeevan Arogya plan explicitly excludes coverage for “self-afflicted injuries or conditions (attempted suicide) and/or the use or misuse of any drugs or alcohol and complications arising from it.”
Explains Monark Gahlot, Partner, Cyril Amarchand Mangaldas, “each case of non-disclosure in insurance policies must be assessed on its specific facts. Concealment of a disease unrelated to the death, or disclosure that is not material enough to influence the insurer’s acceptance of risk, may be available as a defense to the insured.
Can my claim be rejected if I do not disclose my drinking habits to my insurer?
In the case of Sulbha Prakash Motegaoneker & Ors. v. Life Insurance Corporation (2015), the SC held that simple suppression or nondisclosure of a pre-existing disease is not grounds enough to reject a claim.
Hence, on the face of it, your insurer cannot reject your claim simply because you did not disclose the fact that you consume alcohol.
However, there has to be a clear establishment of the fact that the cause of death or hospitalization was not directly linked to such a concealed pre-existing disease. So, say you were hospitalized for a brain hemorrhage and filed a claim regarding this.
For the insurer to reject this claim on the grounds of your not disclosing your alcohol consumption, they will have to assertively establish first that this hospitalization was directly caused by your drinking alcohol.
Notes Aslam Ahmed, Partner, Singhania & Co., “Only material non-disclosures—those that would have influenced the insurer’s decision to issue the policy or determine its terms—can justify claim repudiation. If a policyholder is an infrequent or social drinker and does not disclose this fact, the insurer must establish that the omission was material. We believe that if occasional drinking had no impact on the claimed illness, the insurer may not have valid grounds for rejection.”
However, if this drinking, irrespective of its frequency, worsened a pre-existing condition or was a factor in hospitalization, the claim could be denied.
Ankit Rajgarhia, Principal Associate, Karanjawala & Co., concurs. According to him, if a policyholder is a social or infrequent drinker but did not disclose this while buying the policy, the insurer may still contest the claim. But the key legal ground is materiality—whether the omission influenced the insurer’s risk assessment.
“Sporadic drinking may not always justify repudiation unless it directly caused the claimed illness,” he adds.
All in all, as Alay Razvi, Managing Partner, Accord Juris, underlines, for the insurer to reject a claim, they must prove that the non-disclosure was material and that it would have influenced the underwriting decision. Infrequent or social drinking, unless medically relevant, shouldn’t automatically be treated as material suppression.
How do insurance companies determine materiality?
Your claim can be rejected based on how material, or significant, your non-disclosure of a particular habit like drinking was in contributing to the condition that led you to file a claim. So, if you did not disclose a particular condition while buying a policy, the insurer has no grounds to reject your claim till it does not determine a clear cause-and-effect relationship between your non-disclosed habits and the claim you’ve filed.
Insurers generally rely on medical records, prescriptions, and circumstantial evidence (e.g., hospital notes mentioning alcohol history) to establish a link between the undisclosed habit and the claim. In chronic conditions like liver diseases, which develop over time, even old medical records are relevant.
