Supreme Court Orders Insurance Company to Reimburse Medical Expenses: Hem Raj vs. New India Assurance Co. Ltd. (25 July 2023)

LEGAL ISSUE: Whether an insurance company is liable to reimburse medical expenses incurred by the insured for the treatment of a third party injured in a vehicle accident, when the insurance policy covers third-party liability.

CASE TYPE: Consumer

Case Name: Hem Raj vs. The New India Assurance Co. Ltd.

Judgment Date: 25 July 2023

Date of the Judgment: 25 July 2023
Citation: 2023 INSC 644
Judges: B.V. Nagarathna J. and Ujjal Bhuyan J.
Can an insurance company deny reimbursement of medical expenses when the insured has submitted evidence of payment? The Supreme Court recently addressed this question in a case where an individual sought reimbursement for medical expenses incurred after a car accident in Nepal. The court examined whether the National Consumer Disputes Redressal Commission (NCDRC) was correct in disallowing a portion of the claim based on the insurance company’s argument that there was no evidence of payment, despite the existence of medical bills. This judgment clarifies the responsibilities of insurance companies in processing claims and the importance of evidence in such disputes. The judgment was delivered by a division bench of Justices B.V. Nagarathna and Ujjal Bhuyan, with the opinion authored by Justice B.V. Nagarathna.

Case Background

The appellant, Hem Raj, owned a Mahindra pick-up vehicle insured by The New India Assurance Co. Ltd. The insurance policy covered the territory of India and was later extended to include Nepal. On 11 September 2014, while traveling in Nepal, the vehicle was involved in an accident. The accident resulted in the death of Smt. Santliya Tharu and injuries to Ram Parshad Tharu. The appellant incurred expenses for the treatment of Ram Parshad Tharu and compensation for the death of Smt. Santliya Tharu.

The appellant claimed to have paid a total of Rs. 10,36,500 (Indian Rupees), which included Rs. 3,27,500 for the death claim, Rs. 4,09,000 for hospital expenses, and Rs. 3,00,000 as a final settlement. The insurance company refused to reimburse the full amount, leading the appellant to file a complaint before the District Consumer Disputes Redressal Forum.

Timeline

Course of Proceedings

The District Consumer Disputes Redressal Forum ruled in favor of the appellant, directing the insurance company to settle the claim as per the policy terms. The State Consumer Disputes Redressal Commission upheld this decision. However, the National Consumer Disputes Redressal Commission (NCDRC) partially allowed the claim, holding that only Rs. 3,27,500 for the death claim and Rs. 3,00,000 as final settlement along with Rs. 10,000 as cost was payable, disallowing the medical expenses of Rs. 4,09,000 due to lack of evidence. The appellant then appealed to the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation and application of the terms and conditions of the insurance policy issued by the respondent company. The core issue is the extent of the insurance company’s liability to indemnify the insured for expenses incurred due to an accident involving the insured vehicle, specifically concerning third-party claims. The judgment also touches upon the principles of consumer protection and fair practices in insurance claims processing.

Arguments

Appellant’s Arguments:

• The appellant argued that they had submitted all necessary documents, including medical bills (Exhibits C-19 to C-28), proving the expenditure of Rs. 4,09,000 towards the treatment of Ram Prashad Tharu.
• The appellant contended that the District Forum and the State Commission had correctly directed the insurance company to settle the claim as per the policy terms, including the medical expenses.
• The appellant emphasized that the insurance policy covered third-party liabilities, and the medical expenses were a direct result of the accident involving the insured vehicle.

Respondent’s Arguments:

• The insurance company argued before the NCDRC that there was “no evidence on record” to show that the payment for medical expenses had been made by the appellant.
• The insurance company contended that since the appellant did not specifically contest the District Forum’s order regarding the medical expenses before the State Commission, the claim for these expenses should be disallowed.

Submissions of the Parties:

Innovativeness of the Argument: The appellant’s argument was innovative in highlighting that the insurance company’s denial was based on a misrepresentation of facts, as the medical bills were indeed part of the record. This argument successfully challenged the technicality raised by the insurance company.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issue:

1. Whether the NCDRC was justified in disallowing the reimbursement of medical expenses incurred by the appellant, despite the presence of medical bills on record.

Treatment of the Issue by the Court

Authorities

The judgment does not explicitly cite any previous cases or legal provisions. The court’s decision is based on its assessment of the facts and evidence presented in the case, as well as the orders of the lower consumer forums.

Judgment

How each authority was viewed by the Court?

• The District Forum’s order was viewed as correct in directing the insurance company to settle the claim as per the policy.
• The State Commission’s order was also viewed as correct in upholding the District Forum’s decision and directing the release of admissible amounts.
• The NCDRC’s order was partially set aside to the extent it disallowed the medical expenses, as the court found that the NCDRC’s view was based on a misrepresentation of facts by the insurance company.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the presence of medical bills (Exhibits P-9 to P-28) on record, which the insurance company had claimed were absent. The Court emphasized that the insurance company’s submission to the NCDRC was factually incorrect. The court also noted that the District Forum and State Commission had correctly directed the insurance company to settle the claim as per the policy terms. The court’s reasoning was also influenced by the need to ensure that insurance companies act fairly and justly in processing claims.

Logical Reasoning:

The Supreme Court considered the alternative interpretation that the appellant had not contested the District Forum’s order, but rejected this as the District Forum had directed the insurer to release the amount found admissible. The Court found that the NCDRC had erred in disallowing the medical expenses based on the incorrect submission of the insurer. The final decision was reached by considering the evidence on record and the previous orders of the lower forums.

The Court stated that:

“We observe that the submissions made on behalf of the insurance company before the NCDRC are contrary to the evidence on record as a result of which the appellant herein has been not only deprived of the aforesaid amount spent by him towards medical expenses owing to the injuries sustained by the injured Ram Parshad Tharu in the accident in respect of which there is a third-party insurance coverage, but also has been constrained to approach this Court.”

The Court further stated that:

“We do not think that is a correct reading of the Order of the District Forum inasmuch as the District Forum had specifically referred to medical bills at Exhibits C-19 to C-28 and had directed the insurance company to release the amount found admissible to the complainant -appellant.”

The Court also noted that:

“Even, the State Commission had stated to the same effect that the claims as per the terms and conditions incorporated in the insurance policy had to be released if found admissible and to the extent of entitlement of the insured.”

The Supreme Court allowed the appeal, setting aside the NCDRC’s order that disallowed the medical expenses. The Court directed the insurance company to pay Rs. 4,09,000 with 7% interest from the date of filing the complaint before the District Forum and imposed a cost of Rs. 30,000.

Key Takeaways

• Insurance companies must act fairly and justly in processing claims.
• Submissions made by insurance companies before consumer forums should be based on facts and evidence.
• Medical bills submitted by the insured are valid evidence for reimbursement claims.
• Consumer forums should ensure that insurance companies fulfill their obligations under insurance policies.

Directions

The Supreme Court directed the respondent insurance company to pay Rs. 4,09,000 (Indian Rupees) with interest at 7% per annum from the date of filing the complaint before the District Forum until realization. The Court also imposed a cost of Rs. 30,000 payable to the appellant. The amounts were to be disbursed within one month from the date of the judgment.

Development of Law

The ratio decidendi of this case is that an insurance company cannot deny reimbursement of medical expenses when the insured has submitted valid evidence of payment, such as medical bills. This judgment reinforces the principle that insurance companies must act fairly and justly in processing claims and cannot make submissions that are contrary to the evidence on record. It clarifies that consumer forums should ensure that insurance companies fulfill their obligations under insurance policies.

Conclusion

The Supreme Court’s judgment in Hem Raj vs. The New India Assurance Co. Ltd. emphasizes the importance of transparency and fairness in insurance claim processing. The court held that the insurance company was liable to reimburse the medical expenses of Rs. 4,09,000, along with interest and costs. This decision reinforces the principle that insurance companies must honor valid claims supported by evidence and cannot deny payments based on misrepresentations of facts. This case serves as a reminder for insurance companies to act responsibly and for consumers to be aware of their rights.