The Rajasthan High Court has clarified that the renewal of a health insurance policy after rejection of a claim for a pre-existing disease constitutes a waiver of the exclusion clause, thereby obligating the insurer to honor subsequent claims. This ruling reinforces the principle that insurers cannot selectively enforce policy terms after accepting premiums and continuing coverage despite prior knowledge of the condition.
Background & Facts
The Dispute
Anju Vyas was issued a "Diabetes Safe Health Policy" by Star Health and Allied Insurance Co. Ltd. for the period 25.02.2017 to 24.02.2018. During this period, she was diagnosed with pleural effusion and later developed malignant mesothelioma. Her initial claim for treatment expenses was rejected on the ground of pre-existing disease, despite the ailment manifesting within one month of policy issuance.
Procedural History
- 2019: Anju Vyas filed Claim Petition No. 96/2019 before the Permanent Lok Adalat, Jodhpur, challenging the claim rejection.
- During pendency of the claim, Anju Vyas passed away.
- Her husband, Sandeep Vyas, continued the claim proceedings and was recognized as the legal representative.
- The Permanent Lok Adalat, after examining medical records and policy documents, held that the exclusion for pre-existing disease did not apply.
- Star Health filed a writ petition under Article 226 seeking quashing of the Lok Adalat award.
Relief Sought
The petitioner sought quashing of the Permanent Lok Adalat’s award dated 04.09.2025 and a declaration that the claim was rightly rejected due to non-disclosure of pre-existing conditions. The insurer also sought costs.
The Legal Issue
The central question was whether an insurer’s renewal of a health policy after rejecting a claim for a pre-existing disease constitutes a waiver of the exclusion clause under IRDA guidelines, thereby creating a binding obligation to cover subsequent claims.
Arguments Presented
For the Petitioner
The insurer contended that Anju Vyas had suppressed material facts regarding hypertension, diabetes, and hypothyroidism at the time of policy issuance. It relied on IRDA guidelines stating that coverage for pre-existing diseases is admissible only after 48 months of continuous coverage. It argued that the initial claim rejection was lawful and that renewal of the policy did not override the exclusion clause.
For the Respondent
The respondent, through the Permanent Lok Adalat’s findings, argued that the insurer had accepted premiums and renewed the policy multiple times even after being aware of the claim rejection and the nature of the illness. The insurer’s conduct, it was submitted, amounted to acquiescence and waiver of the exclusion clause.
The Court's Analysis
The Court examined the insurer’s conduct in light of the principles of estoppel and good faith under insurance law. It noted that the insurer itself acknowledged in its rejection letter that the ailment had developed within one month of policy issuance, yet chose to renew the policy for the next term upon receipt of premium. This conduct, the Court held, could not be reconciled with a claim of non-disclosure or fraud.
"Though an argument regarding pre-existing disease has been raised, it is noteworthy that while rejecting the first claim, the insurance company itself observed that the ailment had developed within one month of issuance of the policy."
The Court emphasized that the Permanent Lok Adalat had made a categorical finding that the exclusion for pre-existing disease was not attracted in the renewal policies. The Court declined to interfere with this factual determination, noting that writ jurisdiction under Article 226 is not a forum for re-appreciation of evidence. The insurer’s continued acceptance of premiums after knowledge of the condition amounted to a voluntary assumption of risk.
The Court further held that IRDA guidelines do not permit insurers to unilaterally enforce exclusions after renewing policies with full knowledge of prior claims. The doctrine of uberrimae fidei (utmost good faith) applies reciprocally; insurers cannot invoke policy exclusions after acting inconsistently with them.
The Verdict
The petitioner’s writ petition was dismissed. The Court upheld the Permanent Lok Adalat’s award, holding that renewal of a health policy after claim rejection for a pre-existing disease waives the exclusion clause, and the insurer is bound to honor subsequent claims under the policy.
What This Means For Similar Cases
Renewal After Rejection Waives Exclusion
- Practitioners must argue that any renewal of policy after claim rejection constitutes a waiver of pre-existing disease exclusion, regardless of IRDA’s 48-month rule.
- Insurers cannot rely on pre-issuance non-disclosure if they continue coverage after becoming aware of the condition.
- Medical records showing onset of illness shortly after policy issuance, followed by renewal, strengthen the waiver argument.
IRDA Guidelines Are Not Absolute
- IRDA’s 48-month waiting period applies only to initial issuance; it does not override subsequent conduct of the insurer.
- Where an insurer renews a policy after rejecting a claim, the contractual terms are effectively renegotiated by conduct.
- Policyholders and their heirs may now assert claims under renewal policies even if the illness arose before the 48-month period, provided renewal occurred post-rejection.
Burden of Proof Shifts to Insurer
- Once a policy is renewed after a claim rejection, the insurer bears the burden to prove fraudulent suppression at the time of renewal, not merely at initial issuance.
- Mere existence of a pre-existing condition is insufficient; the insurer must prove intentional concealment during the renewal application process.
- Failure to obtain fresh medical disclosures at renewal may render the exclusion unenforceable.
