India: Delhi High Court says Excluding genetic disorders from insurance policies are illegal

Source: www.delhihighcourt.nic.in

Introduction

Fundamental Rights are the basic set of rights that are vital for human existence. There are seven fundamental rights, which are enshrined in Indian constitution. They are:

1. Right to equality (Article 14-18)
2. Right to freedom (Article 19-22)
3. Right against exploitation (Article 23-24)
4. Right to freedom of religion (Articles 25-28)
5. Cultural & educational rights (Articles 29-30)
6. Right to constitutional remedies (Article 32-35).

Out of these fundamental rights, two of the most discussed ones are Article 21 (‘Protection of Life and Personal Liberty’), which states that, ‘No person shall be deprived of his life or personal liberty except according to procedure established by law’ and Article 14 (‘Equality before Law’), which states that ‘The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India’.

Article 14, i.e. the Right to Equality is the very first Fundamental Right given by the Constitution. It is one of the pillars of a democratic nation like India. The Article clearly prohibits any kind of irrational discrimination between individuals. It firmly asserts that each individual should be treated equally under equal circumstances by law.

According to Justice Bhagwati, ‘Article 21 embodies a constitutional value of supreme importance in a democratic society.’ The umbrella of Article 21 has been widely opened up by Indian Courts and as a result, many rights find shelter under it. One such right is the Right to Health and the Right to Healthcare, which was held by the Hon’ble Supreme Court in State of Punjab v. M.S. Chawla .^[1] In the same case, a constitutional obligation was imposed on the Government to provide health facilities. In Vincent v. Union of India,^[2] the importance of a healthy body for all human activities was underlined by the Hon’ble Supreme Court of India. Recently, the Delhi High Court in the case of M/S United India Insurance Company Limited v. Jai Parkash Tayal, emphasizing the significance of human health held that ‘excluding genetic disorders from insurance policies are illegal’

Facts of the Case

• Jai Parkash Tayal (hereinafter referred to as ‘the Respondent’) took a Mediclaim Policy worth INR 500,000 (USD 7670 approx.) per individual for himself along with his wife and daughter from United India Insurance Company Limited (hereinafter referred to as ‘the Appellant’).
• The Respondent took the first Mediclaim on September 11, 2000, with the National Insurance Co. Ltd. On September 10, 2004, the said policy was shifted to the Appellant. The policy was continuously renewed until September 10, 2012.
• The Respondent suffers from Hypertrophic Obstructive Cardiomyopathy (hereinafter referred to as ‘HOCM’). On January 23, 2004 he was hospitalized, the claims for which were honored, and payments were made by the Insurance Company on February 27, 2006.
• On November 27, 2011, the Respondent was again hospitalized for treatment. A claim of INR 7,78,864 (USD 11947 approx.) was made, which was rejected by the Appellant by a letter dated February 6, 2012. The reasons were mentioned as ‘We are closing your claim file, on account of the following reasons: – TPA Vipun Medcorp P Ltd had repudiated your claim. Since genetic diseases are not payable as per the policy, genetic exclusion clauses.’
• On March 30, 2012, a legal notice was issued by the Respondents calling upon the Appellants to pay a sum of INR 7,78,864 (USD 11947 approx.). A reply to this legal notice was received on April 24, 2012, stating that ‘the claim cannot be paid as `genetic disorders’ are excluded in the policy document.’
• The Respondent then filed a suit for recovery. The Trial Court after taking into consideration all the facts and evidences held that:
  • An insurance policy has to be renewed on the existing terms and conditions, and at the time of renewal fresh clauses and exclusions cannot be added.
  • No advance notice was given to the Respondent and that some new clauses have been added to the policy.
  • Twice in the past, for the same disease, the claims of the Respondent had been approved.
  • There cannot be a discriminatory clause against those persons who suffered from genetic disorders and they are entitled to medical insurance.
• The Order (hereinafter referred to as the ‘Impugned Order’) passed by the Trial Court was in favor of the Respondent and a sum of INR 500,00 (USD 7670 approx.) along with an interest of 8% per annum was awarded. Claim of INR 2,78,864 (USD 4277 approx.) was rejected.
• Aggrieved by the Impugned Order the Appellant filed the present appeal in the Delhi High Court.

Issues

• Whether the exclusion in relation to ‘genetic disorders’ is valid and legal?
• Whether the exclusionary clause 4 relied upon by the Appellant for rejecting the claim of the Respondent applies on facts?

Appellant’s Contentions

• The Appellant emphasizing on Clause 4 of the policy contended that genetic disorders are excluded from being claimed. HOCM being a genetic disorder is thus excluded.
• It was submitted that all general insurance companies in India, have an exclusion, qua genetic disorders.

Respondent’s Contentions

• The Respondent contended that the exclusion of genetic disorders was not a part of the initial policy availed by him, but without any specific notice to him it was added as part of the ‘Exclusions’ in a later policy document. Therefore, he argued that he is not bound by the said Exclusions.

Analysis of Court’s Decision

The Court in this case went into evaluating the meaning of ‘genetic disorder’ and ‘the global approach of insurance policies towards genetic disorders’.

1. Genetic Disorder: Defining Genetic Disorder, the Court held that
   ‘Genes are responsible for the various traits that human beings possess. While genes pass on several positive characteristics, they could at times be responsible for some abnormal medical conditions which are passed on from one generation to another. Such abnormal medical conditions, which are passed on are termed as ‘genetic disorders’.
   
2. Global Position – Genetic Disorders and Insurance: To understand the issue at hand in a better manner, the Court went ahead and explored the manner the insurance policies deal with the exclusion in relation to ‘genetic disorders’ across the globe. The Court held that
   ‘medical care is a basic human right, universally recognized as far back as in 1948. In the modern world, when health care costs are very high, availing health insurance is an integral part of medical care. The unanimous opinion appears to be that discrimination based on genetic heritage and disposition is contrary to human rights and in the context of insurance, exclusions relating to genetic disorders is heavily regulated.’
   
3. Indian Position on Genetic Disorders and Insurance Policies:
   The Court very clearly opined that discrimination on the bases of ‘Genetic Disorders’ is in contradiction of Article 14 and 21 of Indian Constitution as it was too broad, ambiguous and discriminatory. The Court pronounced that ‘Health insurance with the exclusion of ‘genetic disorders’ hits at the basic right of an individual to avail of insurance for prevention, diagnosis, management and cure of diseases. Excluding any particular category of individuals i.e., those with genetic disorders, from obtaining health insurance or having their claims honored, based on genetic disposition would be per se discriminatory and violative of the citizen’s Right to Health.’
4. Insurance Policy:
   According to the Court:

• The clauses in insurance policy should meet the test of ‘reasonableness’.
• Insurance Regulatory Development Authority (hereinafter referred to as ‘IRDA’), which regulates the insurance sector in India, ought to have supervised the manner in which the term ‘genetic disorders’ is being misused by insurance companies to reject genuine claims. It did ignore the functioning of insurance companies.
• Once an insurance policy has been issued, the conditions of the same cannot be altered. The Court held that exclusion of genetic disorders did not exist in earlier policies obtained by the Respondent and was included, without notice to the insured, in the last policy document for 2011-12. The mere fact that a new policy document is issued upon each renewal, does not change the basic nature of the contract. Any unilateral insertion or change in the clause of the contract has to be with the consent of the insured, and there is no evidence on record to show that this clause was brought to the notice of the insured. Thus, there was no ‘consensus ad idem’ on the exclusionary clause. It is merely a unilateral insertion, which would not bind the Respondent.
  
• Insurance companies are free to structure their contracts based on reasonable and intelligible factors, which should not be arbitrary and in any case cannot be ‘exclusionary’. Such contracts have to be based on empirical testing and data and cannot be simply based on subjective or vague factors.

Therefore, the Court while upholding the order of the Trial Court held that,
“a person, suffering from a genetic disorder, needs medical insurance as much as others. The suit is decreed for a sum of INR 500,000 (USD 7670 approx.) along with interest @12% from the date of filing of the claim with the Appellant Insurance Company till the date of payment.

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^[1]AIR (1997) SC 1225

^[2]1987 AIR 990