Bombay High Court Suspends Insurer’s Rejection of Bipolar Person’s Policy Proposal

In a relief to a Mumbai man caught between two health insurers over the issue of coverage for mental health issues in their policy, the Bombay High Court granted a stay of the rejection of his proposal by the “new insurer” and allowed the man to approach “the existing insurer” for an appropriate extension of his policy.

Observing that there was a prima facie basis in the applicant’s case, a division bench of Judges SC Gupte and MS Karnik allowed the application and expedited the hearing of the case “given the nature of the controversy” and “in the interests of justice”.

In an order issued on June 24, just four days before the applicant’s health insurance policy expired, the judiciary found it would cause him serious harm if no redress was granted.

The judiciary also noted that the two insurance companies had not appeared in court despite a formal notice.

The issue raised in the petition (name chosen by the court with the provisions of the Mental Health Care Act 2017 in mind) concerns a circular issued by the Insurance Regulatory and Development Authority of India (IRDAI ) August 16, 2018. A single circular page signed by the Director General of IRDAI (Health) asks all insurers to respect article 21 (4) of the law on mental health.

The section reads as follows:

21. Right to equality and non-discrimination.— Everyone with a mental illness should be treated equally with those with a physical illness in the provision of all health care which must include the following, namely:

Each insurer should provide medical insurance for the treatment of mental illnesses on the same basis as that available for the treatment of physical illnesses.

The petitioner had taken out a policy with a public health insurer – Oriental Health Insurance Company Ltd (existing insurer). He did, however, seek to transfer his policy to a private insurer – Star Health and Allied Insurance Company Ltd (new insurer). The new insurer rejected his proposal citing mental health issues, claiming the petitioner suffered from Bipolar disorder type II, a neurological disease. He then wrote to IRDAI, but the regulator did not intervene. Keeping in mind that the policy with the existing insurer was due to expire on June 28, the petitioner approached the HC on June 17.

The bench of the Bombay HC division relied on a judgment of the Delhi High Court in the case of Shikha Nischal v National Insurance Company at the start of this year.

In this case, the Delhi HC observed that most of the provisions of the Mental Health Act as also the circular issued by IRDAI, was that mental illnesses cannot be treated any differently from physical illnesses and that insurance policies cannot discriminate between these two types of illnesses.

The Bombay HC magistracy then observed: “Each insurance company was required to comply with the provisions of the law as well as the circulars issued by the IRDA and that the IRDA could turn a blind eye to any non-compliance. duty to monitor and ensure that the provisions of the Mental Health Act are implemented by all insurance companies for the benefit of people with mental health problems seeking medical policies. The formation will now hear the case on July 28.

The court left open the applicant’s options regarding the request for extension / renewal of his policy with the existing insurer, without any change in the conditions, citing the portability of the policy in the 2016 regulation published by the IRDAI. The relevant clause says –

When the result of the acceptance of portability is still expected from the new insurer on the renewal date

a. the existing policy can be extended, if the policyholder so requests, for a short period of at least one month by accepting a pro rata premium for this short period and

b. the existing insurer must not cancel the existing policy until a confirmed policy from the new insurer is received or there is a specific written request from the insured

vs. the new insurer, in all these cases, must make the date of the beginning of the risk coincide with the expiry date of the short-term policy issued on the basis of the request of the policyholder. If, for any reason, the insured intends to sue the policy before the expiration of the policy or before the expiration of the short-term policy referred to in clause (5) (a) above, with the existing insurer, it will be allowed to continue by charging a regular premium and without imposing any new conditions.

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