Time restrictions on filing insurance claims are void: HC

The insurance company had rejected the claim on the ground that it was submitted after expiry of the stipulated 90-day window post hospitalisation

at time restrictions on submission of insurance claims are contrary to the law and ordered the United India Insurance Company Ltd to clear health insurance claims of a city resident and his wife, totalling ₹1.13 lakh.

The insurance company had rejected the claim on the ground that it was submitted after expiry of the stipulated 90-day window post hospitalisation. But a bench of justices Bharati Dangre and Manjusha Deshpande held that the policy term – extinguishing rights of the insured on expiry of a period was contrary to section 28(b) of the Indian Contract Act and therefore void.

The petitioner, CP Ravindranath Menon, had availed a group health insurance cover through his employer, Export Import Bank of India. On May 24, 2022, he had through the bank submitted four insurance claims for himself and his wife for distinct periods, totalling ₹1.13 lakh. The insurance company had, however, declined to process the claims saying they were time-barred, prompting Menon to approach the high court.

In his petition, Menon relied on the 2022 decision of the apex court in The Oriental Insurance Company case, wherein the condition of time-line in lodging of an insurance was found to be contrary to section 28(b) of the Indian Contract Act, 1872 and therefore void.

The insurance firm contested the plea, claiming the 2022 apex court decision was based on specific facts and circumstances and it could not be applied to Menon’s case. The firm’s counsel, advocate Varsha Chavan, submitted that the policy availed by the petitioner was a contract under which he had specifically agreed to all the stipulations contained in it.

She added that one of the clauses of the policy clearly contemplated that bills submitted more than 90 days after hospitalisation would not be paid or reimbursed and the petitioner was bound by it; since the reimbursement was claimed after the said time limit, the insurance company was right in refusing the claim.

Advocate Chavan relied on a 2004 Supreme Court decision, holding that an insurance policy was a contract between parties and therefore, the terms of the agreement have to be strictly construed to determine the extent of the liability.

The high court said it had no difficulty in accepting the proposition of law laid down by the apex court in the 2004 decision. But contracts are governed by the Indian Contract Act and if section 28 was the facet of this contract, then it must come into operation with full force, the court said.

The bench said section 28 of the Indian Contract Act declared that an agreement which extinguished the rights of a party or discharged a party from any liability on the ground of expiry of a specified period was void to that extent.

In our view, an inhibition in insurance policy restricting the period of availing the benefit under the policy, which the insured is otherwise entitled to, cannot be sustained and has to be declared as void and non-est in the wake of the (2022) decision of the apex court,” the court said.