Don't Penalize Policyholder for Hospital's Lapses: Karnataka HC to Insurer

In a crucial ruling, the Karnataka High Court has clarified that insurance companies cannot deny legitimate medical claims solely because of procedural lapses by the hospital. This direction came in response to a petition filed by P N Narasimha Murthy, a retired engineer residing in Bengaluru, against United India Insurance Co. Ltd. The court emphasized that a policyholder should not bear the consequences of errors or non-compliance committed by a healthcare institution.

Murthy had undergone surgery in 2019 at a private hospital and later filed for reimbursement of ₹1.97 lakh under his health insurance policy. However, United India Insurance rejected the claim, citing the hospital's failure to adhere to certain documentation standards and internal protocols. The insurer contended that the absence of mandatory records and protocol adherence rendered the claim invalid.

Justice Suraj Govindaraj, who presided over the case, firmly disagreed with the insurer's stance. He observed that the treatment provided to Murthy was genuine, and the rejection of his claim was unjustified. The judge remarked that the insured individual has no control over the hospital’s internal administrative systems or their compliance with insurer requirements. Hence, policyholders should not be penalized for third-party lapses that are beyond their influence.

The court held that as long as the treatment was legitimate and necessary, the insurance company was obligated to honor the claim. It ruled that Murthy was entitled to receive the claimed amount of ₹1.97 lakh. Additionally, the court ordered the insurance company to pay interest at the rate of 6% per annum from the date of the claim’s original submission.

Justice Govindaraj’s judgment sets an important legal precedent in the health insurance sector. It underscores the principle that insurance coverage should not be denied to genuine claimants due to external procedural deficiencies. The verdict reinforces the rights of policyholders and brings attention to the responsibilities of insurers to deal with claims fairly.

The insurer has been directed to settle the claim within six weeks. This ruling could influence future decisions where claim denials are based on technical lapses attributable to hospitals or third parties, rather than the insured themselves.

(Rh/Sakshi Thakar/MSM/SE)