Case: United India Insurance Company Limited &amp; Another Vs. Manubhai Dharmasinhbhai Gajera &amp; Others

7. Respondents No.1 obtained the mediclaim policy from the appellant in April, 1995 and renewed annually upon payment of the requisite amount of premium. After over three years namely, in July, 1998, Respondent No.1 suffered a coronary disease and was admitted in the Escorts Heart Institute and Research Centre where he underwent `Angioplasty. A claim made by him was paid by the appellant. In January, 2001 he was once again admitted to the Escorts Heart Institute and Research Centre and once again underwent `Angioplasty. The amount claimed was duly reimbursed by the appellant to the respondent. In May, 2002 he was hospitalized in Holy Family Hospital for a minor operation and the medical expenses claimed to that effect were reimbursed by the appellant. In April, 2002 he underwent a bye-pass surgery. Respondent No.1 submitted his claim which, however, was not paid.8. On 3rd April, 2003, the respondent approached the appellant for renewal of the policy and issued a cheque towards payment of the premium for the purpose of renewal of the policy w.e.f. 6th April, 2003, which was refused on the purported ground of `high claim ratio. After serving notice, the said respondents filed a writ petition which was allowed by the learned Single Judge of the Delhi High Court by his order dated 7th January, 2005 directing the appellant to renew his mediclaim insurance policy.9. An intra court appeal filed by the appellant was dismissed by reason of the impugned judgment and order dated 15th July, 2005.The insurer in SLP (C) No.9877entered into a contract of mediclaim insurance in 1990 for a sum of Rs.90,000/- from 1992 to 2002. He had been making payments of the premiums regularly. His policy had been renewed every year. It was also renewed for the period 4.10.2001 to 3.10.2002. The insureds wife, son and daughter-in-law have also entered into such policy since 1992. Their policies had also been renewed from time to time without any change in terms.59. On or about 9.9.2002, Respondent No.1 handed over a cheque for a sum of Rs.6,377/- by way of renewal of insurance policy. As no action thereon was taken, a reminder was sent. A legal notice was also issued. The legal notice was refused to be accepted by the Divisional Manager. In response thereto, only on 30.9.2002, the appellant stated that the policy would be renewed by loading of 300% premium. A sum of Rs.18,982 was deposited. A receipt acknowledging the sum of Rs.6,377/- was also issued. Despite issuance of the said sum, the policy was not renewed. Strangely enough, only on October 3, 2002, the appellant stated that the said policy could be renewed subject to exclusion of the diseases specified therein. It was in the aforementioned situation, the writ petition was filed.60. In SLP (C) No.10205 of 2004, the second respondent, who is a practicing consultant neurologist and physician since 1961, had taken mediclaim insurance for himself his wife and his family members since 1992-1993. He was diagnosed with Hypogamglobulinemias in August-September 1999. Despite the same, the policy was renewed. By a letter dated 26.7.2002, appellant informed him that his mediclaim policy which was to expire on 13.8.2002 would be renewed subject to the exclusion of the disease Septioemia with Hypogamglobulinemias and was advised that the next premium will be accepted after loading of 100% with 5% excess for each and every claim. It is at that juncture, the writ petition was filed.61. Respondent No.3 in SLP (C) No.10205 of 2004 had taken a mediclaim policy and accident insurance policy in 1988. By a letter dated 15.1.2002, the mediclaim policy for the year 2002-2003 was refused to be renewed and he was asked to renew his policy in another company. The policy was cancelled.62. We have noticed the judgment of the Gujarat High Court in each of these cases.63. First Respondent in SLP (C) No.1534 of 2006 approached the Delhi High Court when the joint mediclaim policy was refused to be renewed. His claim of Rs. 2,19,660/- which he had incurred for undergoing a bye-pass surgery in January 2003 was refused to be paid. He had obtained mediclaim policy in April, 1995. The same had been renewed. He had undergone Angioplasty in July 1998 and again in June 2001. He had undergone a bye-pass surgery in December 2002. Respondent No.1 tendered premium for renewal of the policy in April, 2003 which was declined on the ground of `high claim ratio in the last three years.

Reasoning:
42. A bare perusal of the said decision would show that the same was rendered in the context of contracts entered into between the State and its citizens pursuant to public auction of tenders or by negotiation. Respondents therein sought to get new term incorporated in the Contract on the specious plea of fairness. The said place was rightly rejected. The fact, however, remains that the ratio in Issac is not applicable to the fact of the present case not because the duty to act fairly on the part of a State has no application in the field of a contract but the same would not apply for the purpose of alterations or modifications of a term of contract.43. Existence of the jurisdiction of the Superior Court of India upon invoking Article 14 of the Constitution as also Section 23 of the Indian Contract Act to strike down a clause in the contract which the court feels to be unconscionable having regard to the equal bargaining power of the parties is not in question but the said provisions would have no application for the purpose of modifications, alterations or additions of a term in the contract. There cannot furthermore be any doubt whatsoever that each case must be considered on its own facts which would obviously lead to the conclusion that by reason thereof the Court shall not read into the contract an automatic renewal clause in a contract of insurance if there does not exist any.44. This brings us to the question of reading the prospectus into the contract of insurance. We do not find that the prospectus and contract of insurance speak on different terms. They seek to attain the same object. Clause 11 and 13 of the prospectus and clauses 5, 9 and other clauses lead to one conclusion that the policy is subject to renewal which is dependent upon the mutual consent of the parties. It is also evident that both the parties have the rights to cancel the insurance policy. If it is to be held otherwise, logical corollary would be that even the insured would not be at liberty not to discontinue the insurance policy. But herein we are not concerned with such a question.We are referring to the aforementioned provisions only with a view to show that whereas attempts are being made to strengthen the control over the insurance sector by creating new forums which would easily be accessible to the service recipient, the insurance companies having regard to the new policy of the Central Government, in general and under Section 24A of the 1972 Act in particular should not be allowed to make all attempts to frustrate the same. Whereas on the one hand we cannot forget the new market economy and the Foreign Direct Investment, we also cannot shut our eyes to the ground realities. There is a huge gap between the high sounded wants of the Government and the realities on the ground. It is essential that while on the one hand, the insurance companies are not put to undue burden keeping in view the changes in the statute as also the policy decisions of the Central Government, they cannot also be permitted to act wholly arbitrarily and unreasonably. They cannot be permitted to create a social condition, which would negate all human rights. We although would not place medicare and old age being the facets of human rights with abject poverty, but then the gap between the object on the statutes and the action on the part of the players on the field must be taken care of.Each of the aforementioned cases clearly shows that the action on the part of the authorities of the appellant was highly arbitrary. Respondents though were not entitled to automatic renewal, but indisputably, they were entitled to be treated fairly. We have noticed hereinbefore some of the clauses contained in the prospectus as also the insurance policy. When a policy is cancelled, the conditions precedents therefor must be fulfilled. Some reasons therefor must be assigned. When an exclusion clause is resorted to, the terms thereof must be given effect to. What was necessary is a pre-existing disease when the cover was inspected for the first time. Only because the insured had started suffering from a disease, the same would not mean that the said disease shall be excluded. If the insured had made some claim in each year, the insurance company should not refuse to renew insurance policies only for that reason. The words `incepts for the first time as contained in clause 4.1 as also the words `continuous and without break if the renewal premium is paid in time, must be kept in mind as also the reasons for cancellation as contained in clause 7(1)(n) thereof.65. Renewal of a medi-claim policy subject to just exceptions should ordinarily be made. But the same does not mean that the renewal is automatic. Keeping in view the terms and conditions of the prospectus and the insurance policy, the parties are not required to go into all the formalities. The very fact that the policy contemplates terms for renewal, subject of course to payment of requisite premium, the same cannot be placed at par with a case of first contract.66. Having regard to the fact situation obtaining in each case, we are not inclined to exercise our discretionary jurisdiction under Article 136 of the Constitution of India. Before parting with this case, however, we would like to observe that keeping in view the role played by the insurance companies, it is essential that the Regulatory Authority must lay down clear guidelines by way of regulations or otherwise. No doubt, the regulations would be applicable to all the players in the field. The duties and functions of the Regulatory Authority, however, are to see that the service provider must render their services keeping in view the nature thereof. It will be appropriate if the Central Government or the General Insurance Companies also issue requisite circulars.67. Appellants before us being subsidiaries to General Insurance Corporation cannot ignore the statutory provisions. They are bound by the directions issued by the Central Government.68. We would request the IRDA to consider the matter in depth and undertake a scrutiny of such claims so that in the event it is found that the insurance companies are taking recourse to arbitrary methodologies in the matter of entering into contracts of insurance or renewal thereof, appropriate steps in that behalf may be taken.