Health Insurance Claims Can Be Rejected For Undisclosed Alcoholism: Supreme Court

The Supreme Court has ruled that health insurers are justified in rejecting claims for conditions caused by alcoholism if the policyholder did not disclose it when obtaining the policy, as per multiple reports.

This ruling came in connection with a dispute over a claim rejection by the Life Insurance Corporation (LIC). 

The court upheld LIC’s decision to reject a hospitalisation claim under the "Jeevan Arogya" scheme, citing the policyholder’s failure to disclose chronic alcoholism.

The policyholder had been hospitalised due to severe abdominal pain before succumbing to a cardiac arrest.

The judgment said that full disclosure by policyholders becomes all the more crucial in general schemes like Jeevan Arogya where no medical tests are conducted before the policy is issued, reports said.

The deceased’s wife approached LIC for hospitalisation claims, which were refused citing the fine print of the policy. The insurer stated that the claim was rejected under the exclusion clause, which bars coverage for “self-inflicted conditions” and “complications resulting from alcohol misuse.” It added that since the applicant had explicitly mentioned that he did not consume alcohol, the company had the right to deny the claims for suppression of information. 

The deceased’s wife then sought legal remedies, where a lower court earlier ruled in her favour asking the LIC to pay the costs. The state consumer commission and the national consumer commission also upheld the lower court’s decision, according to the reports.

However, the Supreme Court judgment noted, “The deceased provided false information in the proposal form. The relevant question in the form asked, 'Does the life insured consume alcohol/cigarettes/bidis/or tobacco in any form?' The deceased answered, 'No.' The policy was issued based on this declaration. However, evidence on record establishes that the deceased was a chronic alcoholic. This fact was not disclosed at the time of obtaining the policy."

The apex court added that chronic liver conditions do not surface overnight and the applicant, in this case, willfully suppressed information while subscribing to the policy.