Case Analysis :RitaKriti Joshi vs New India Assurance Company
Abstract
The paper examines the relationship between a preterm infant and a new-born child and how the insurance firm has utilised these categories as a criteria for differentiating between these phrases without any justification. The study goes on to explain how Indian insurance companies exclude claims in unclear ways and reject insured parties’ claims in arbitrary manner and breach their fundamental rights. In the recent judgment of Rita Kriti Joshi vs New India Assurance Company, the Bombay High Court gave a prominent judgment that protected the rights of insured parties and pronounced a judgement that rejects the claim of the insurance company differentiating between the terms New-born and Premature arbitrarily. This case opens a new arena for the rights of premature babies under an insurance policy in India. This paper delves into various aspects of the case and analyses the position taken by the petitioner and respondent in the case.
The author makes an effort to analyze and comment on the legal reasoning used by the court to decide the case. The paper also discusses the different perspectives drawn over a single policy and its modifications. The paper later goes into depth of knowing whether the insurance companies can be regarded as a “state” or an “independent entity”. Dealing with uncertainty and irrelevance, the various aspects of the case have been taken into account. Not only acts but sections, different provisions, and legal opinions have also been focused upon. The paper, therefore, highlights different arguments put forth by both parties with neutrality and takes account of the justice delivered in the case.
Keywords: Premature, New-born baby, Insurance, Fundamental right, Premium.
Introduction
A health insurance policy is a contract between an insurer and a policyholder in which the insurer pays for medical expenses incurred by the insured individual as a result of an injury or disease[1]. In other words, it gives the policyholder financial stability by protecting his or her hard-earned money from unforeseen medical problems. Most health insurance plans in India cover practically all major illnesses, accidents, and annual health check-ups, which can be useful at any stage of a child’s development[2]. Many Indian insurers provide health insurance floater policies that cover newborns[3](at least 3 months old) and kids up to the age of 20. Infants under the age of 90 days are often not covered by health insurance since the first 90 days are deemed dangerous. As a result, they have been added to several family floater health plans, which are usually long-term in nature and to which the children’s rights can be added after their birth. When the newborn reaches the age of 90 days, he or she is eligible for health insurance. Adding the youngster to their family’s health insurance coverage, such as a family floater health insurance policy, is another possibility. One method is to include newborn baby coverage in one’s family health insurance or maternity insurance. Some firms include babies in their maternity policies from the start, and infants might be viewed as a benefit or an additional cover.
In the case of Rita Kirit Joshi vs. New India Assurance Co. Ltd.[4] the court ruled for the first time that a preterm infant and a newborn baby are treated the same under an Indian health insurance policy. This important decision grants new-borns rights. The rights of a premature baby being delivered through this case analysis, which is contested under the policy of insurance companies with uncertainty in the case.
Facts:
The Petitioner took two medical policies in 2007 covering a claim for 20 lakhs, from New India Assurance Company These policies were renewed periodically by the Petitioner. In 2018 Petitioner underwent an emergency Lower Segment Caesarean Section to deliver twin boy babies at 30 weeks gestation (LSCS). The newborns needed to be admitted to Surya Hospital’s Neonatal Intensive Care Unit (NICU) for life-saving care since they were premature.
After the twins were released from the hospital, the petitioner submitted a claim to the respondent under the insurance plans, alleging the costs she had expended for the twins’ care in the Neonatal Intensive Care Unit (NICU). The claim amount for Twin Baby 1 was Rest. 5,55,378 and Rs. 5,52,565 for Twin Baby 2. The total amount claimed was Rs. 11,05,953.00.
The Petitioner’s claim was rejected by the Respondent regarding Clause 3.11 of the policy Regarding Twin Baby 1, The respondent claimed that two things were not covered by the policy: first, any “expenses incurred towards postnatal care, preterm or premature care, or any such cost incurred in connection with the delivery of such New Born Baby would not be reimbursed. Later, it was claimed that the same reasons were used to deny the claim for second baby
The Petitioner and her father-in-law communicated with the respondent. On several occasions. They asked the respondent to revise the way it interpreted Clause 3.11 of the policy. Unfortunately, the Company declined to reconsider its choice, and the Petitioner was informed that nothing could be done about it because it was a policy provision.
The Petitioner believes that, despite regularly paying the policy’s premium and periodically renewing it, the Respondent company’s impugned repudiation, particularly based on such constrictive, unilateral, unsustainable, incorrect, and outright arbitrary exclusions, violates both the petitioner’s and her unborn children’s fundamental rights under Articles 14[5] and 21[6] of the Indian Constitution Hence filed a case for recovery of the amount.
Issue Raised before the Court:
1.Whether New India Insurance Company comes under the definition of ‘state’ under Article 12 of the constitution?
2.Whether the term ‘Premature baby’ and ‘newborn baby’ be considered the same person in health insurance policies in India?
3. Whether clause 3.11 is fair and reasonable under the insurance contract?
Rule of law:
According to,
Section 124 – “A contract by which one party promises to save another from loss incurred to him by the conduct of the promisor, or by the conduct of any other person is called a contract of indemnity”[7].
Section 125 clause (b) – Rights of Indemnity-holder when sued
“The promise in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor”
“The promisee in the contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor all the costs which he may be compelled to pay in any such suit, if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit[8]”.
Constitutional Law-
Article 12“of the constitution states that the “State” can be defined as the “Legislative and Executive organs of the Union government, Legislative and Executive organs of the State government, all local authorities and statutory and Non-statutory authorities.[9]”
Article 14“of the constitution states that “the state shall not deny to any person inequality before the law or the equal protection of the laws within the territory of India[10]”
Article 21states that “no person shall be deprived of his life or personal liberty except according to procedure established by law[11].”
Arguments of Petitioner
1.Whether New India Insurance Company comes under the definition of ‘state’ under article 12 of the constitution?
According to Article 12, the control of the government does not necessarily imply that the body must be completely directed by the government. It simply means that the government should have some control over how the body functions. Merely because a body is statutory does not constitute it a “State.” Both statutory and non-statutory organisations can be deemed a ‘State’ if they receive monetary resources from the government that operates under it.
In the case of R.D. Shetty v. Airport Authority of India[12], The court established some criteria for determining whether or not an agency or firm is a state. These points include whether the State’s financial resources are the primary funding source, i.e. the government owns the entire share capital, whether the State has deep and pervasive control, whether the functional character is governmental in nature, whether a department of government has been transferred to a corporation, and whether a company has monopoly status conferred or protected by the State. All of these criteria are met by New India Assurance Company. It is a one hundred per cent government-owned worldwide general insurance firm headquartered in Mumbai that functions in 28 countries, which means the state has deep and pervasive control over the public sector undertakingIn 1956, New India Assurance Company transferred the life insurance business to the Life Insurance Corporation of India which was formed under the Life Insurance Corporation Act 1956[13] according to which life insurance business in India was nationalized, which means the entire share capital is held by the government.
Under the “General Insurance Business (Nationalisation) Act 1972,” which lead to the nationalisation of general insurance business in India, the General Insurance Corporation of India was established in 1973 as an affect of it. The New India Assurance Company became a subordinate of the General Insurance Corporation of India. In terms of total value, domestic gross direct premium profit after tax, and market share, The new assurance Company has the monopoly in the market after that and insurance being the functional character of the government, thus the company should be considered as a ‘state’ under article 12[14]of the constitution.
2.Whether Clause 3.11 is fair and reasonable under the insurance contract?
The insurance policy’s clause 3.11 was introduced the same year and protects the infant “from injury or illness” from the time of birth until the policy’s termination. It is vital to note at this point that coverage for new babies was added in the year when the petitioner’s twins were born, and the benefit was made available to all insurers in that year without the need to pay a supplementary premium. If additional premiums for newborn coverage were paid off, the coverage could be expanded. The respondent had denied the claim, stating that the clause failed to include expenditures spent for the baby’s postnatal or premature care and delivery. It was further stated that Congenital external anomalies were not taken into account.
Furthermore, clause 3.11 was regarded as being unreasonable. The insured’s pertinent information is all undisputed. The phrase “newborn baby” has not been clarified in the original policy clause but in the complete policy document. There are no issues with the policy’s issuance, renewal, frequent monthly payments, or the insured’s disclosure of pertinent information.
Additionally, the petitioner stated that the impugned repudiation by the Respondent company, particularly on such limiting, unilateral, incorrect, and facially arbitrary exclusions, infringes the fundamental rights under Articles 14 and 21 of the Indian Constitution, not just of the petitioner but also of her newborn babies, which is contrary to the insurance policy act. This is even though the petitioner frequently paid the premium on the policy and periodically renewed it.
The terms “illness” and “injury” are not exhaustive, either. The baby’s prematurely born or preterm birth is accountable for the harm. To embrace the difference and use it to support repudiation is impossible. The strategy is unreasonable, unfair, and at odds with the core principle of an insurance policy’s maximum good faith.
Thus, according to the petitioner Clause 3.11 is not maintainable.
According to the case;
Bharat Watch Company V/S National Insurance Company Lmited[15]
The appellant sells watches in a showroom in Solapur. The respondent had provided insurance for the appellant’s watch stock. During the course of the night after the shop had closed for the day, a theft occurred on the premises.
The insurance company denied the claim and asserted that the insured’s insurance policy covered theft that was committed using force and power rather than duplicate keys.
Issue Raised
There has never been a disagreement over an insurance contract. Whether the exclusionary conditions were disclosed to the appellant is the only question at hand.
Court Observation:
The Court concluded that the insurer did not communicate the terms and conditions of the exclusion and special conditions to the appellant and consequently, they were not binding. Therefore the exclusionary provision was invalid, so the insurance company can’t repudiate the claim.
3.Whether the term ‘Premature baby’ and ‘Newborn baby’ be considered the same person in health insurance policies in India?
The Insurance Regulatory and Development Authority of India[16] (IRDAI) published guidelines that define a newborn baby as one who is up to 90 days old and was born during the policy’s effective term. The petitioner claimed that the IRDAI circular, dated October 12, 2022, states that all insurance policies that cover newborns must comply with the requirements without exception and offer insurance commencing from the day of birth, free from any waiting periods, submits, or other restrictions. The Insurance Company makes a misleading distinction between a “newborn” and a “premature infant” or a baby born “preterm” because a newborn baby may be one who is born “full term” or “preterm.”In the same way that a baby born preterm does not become an “earlier born” or, to be more precise, an “old born,” and thus a strategy adopted by the Insurance Company goes against the core principle established by IRDAI of absolute good faith and is irrational, unjust, and conflicting. Thus according to the stated policy of IRDAI and its circular issued .The insured sum should be paid without making any distinctions because there was no rational classification made by the Insurance Company and no visible difference between preterm and newborn babies exists[17]
Arguments of respondent
1.Whether New India Insurance Company comes under the definition of ‘state’ under article 12 of the Constitution
The Respondent submits that the dispute raised in the Petition regarding the repudiation of the claim of the petitioner lodged under Mediclaim Policy is purely contractual in nature, though a public sector insurance company cannot be regarded as ‘State’ within the meaning of Article 12[18] of the Constitution of India since the dispute does not relate to the statutory or governmental function carried out by the Respondent.
In India, IRDA is responsible for overlooking insurance in India and not the New India Insurance policy. The “Insurance Regulatory and Development Authority Act, 1999” (IRDA Act 1999) created the Insurance Regulatory and Development Authority of India (IRDAI), a statutory organisation, to oversee the overall growth and development of the Indian insurance industry. The IRDA’s main objectives include defending policyholder preferences, inclusion strategic planning, transparency, and orderly economic expansion of the insurance industry; quick resolution of legitimate claims; establishment of an efficient grievance redressal mechanism; and promotion of fairness, accountability, and orderly conduct in the financial sector when dealing with insurance. These objectives can be viewed as a sovereign function. No statutory or governmental duties are carried out by New India Insurance Company in India.
2.Whether Clause 3.11 is fair and reasonable under the insurance contract?
The respondents had asserted that based just on a quick skim of Section 3.11 of the policy, it explicitly stated that no claim was allowed for post-natal care and that pre and post-natal expenses are not payable as per the policy terms and conditions.
It was also contended that the insurance policy’s terms must be read exactly as written, without any modifications or omissions.
It was contended that the statement about “coverage and exclusion” in clause 3.11 of the policy must be viewed in context and cannot be understood independently. Additionally, it was claimed that if this case had been a normal delivery at term rather than preterm birth, none of the other issues listed in the discharge summary would have arisen, and as a result, the policy’s terms and conditions will not compensate the claim.
The appellant had an agreement for Mediclaim coverage with the insurer in the case of
Jacob Punnen vs. United Insurance co. Ltd.[19]By making the necessary amount, the insurance was continuously renewed for years. The appellants’ updated insurance policy went into effect in 2007 and remained in effect through 2008. The insurer issued the appellants a reminder to renew their coverage every year before the Mediclaim’s expiration date (2008). The appellants were also made aware of the premium’s 17.705/- price tag in the reminder.
The appellants thereafter filed a complaint against them, feeling aggrieved, urging the court to order the insurance to pay them compensation, plus fees and interest. The appellants used checks to make the necessary payment. Before the District Forum, the insurer maintained that the terms and conditions of the Mediclaim coverage were subject to cyclical revision. The policy for the relevant year stated that methods of the policy limit could be claimed for a set amount, and any insurer also argued that after issuing the policy document that the appellants approved, the latter could not claim later that there were any amounts beyond the terms agreed upon.
The appellants’ legal adviser contended that the State Forum and the NCDRC miscalculated in concluding that the appellants were informed of and were presumed to have been aware of the conditions of the policy. The NCDRC concluded that the respondents had provided adequate service. It was emphasized that the appellants had not requested and secured a new policy, but rather had renewed old insurance, as they had previously done periodically each year. Therefore, the case suggests that the policy introduction is righteous and reasonable given in the mentioned provision.
3.Whether the term ‘Premature baby’ and ‘Newborn baby’ be considered the same person in health insurance policies in India?
The Respondent contacted three medical professionals who all agreed that the neonates’ problems were brought on by their premature birth and that a baby delivered at term would not generally experience such complications.Respondent noted that coverage for newborns was first offered in the year the Petitioner’s twins were born and that all policyholders in that year received the benefit without having to pay any additional premiums. For subsequent years, Respondent also noted that the original policy only provided limited risk coverage of Rs. 1 lakh. The benefits of the original policy state that even though the initial policy already included additional coverage for newborns without requiring the payment of a separate premium, the top-up insurance was nonetheless provided by collecting premiums only from the petitioner and her husband. Therefore, the terms of the top-up policy do not include postpartum or preterm care for any ailment or illness.
The respondent, therefore, asserted that they are not responsible for paying any such sum because their policy did not cover expenses for paying for a premature infant.
Observation by Court:
The court observed that a distinction is being tried to be drawn between expenses involved with “illness or injury” and those being associated with “postnatal care, preterm birth, or premature birth.”. Post-natal care postulates a newborn. A “pre-term” or “premature” baby is born before the due date. The term “care” means providing treatment for illness or suffering. The only interpretation that makes sense is that medical costs for illness or injury are the same as medical costs for postnatal care, preterm birth, or premature birth. Moreover, “illness” and “injury” are not exhaustive terms. Due to the baby’s preterm or premature birth, there may have been an injury.
Also, the court mentioned a circular from India’s Insurance Regulation and Development Authority[20], dated July 22, 2020. The aforementioned circular may be used as the primary circular on the standardization of health insurance products. According to clause 29 of the aforesaid circular, a “new-born baby ” can be
considered a baby born during the policy period that has not yet turned 90 days old. As a result, the petitioner’s newborn baby twins are included in the definition of the above-mentioned clause. Contrary to the real spirit of the aforementioned clause, insurers do not offer coverage to newborns or infants with internal congenital birth abnormalities from day one. In light of the foregoing, it is reiterated that all insurance products that provide coverage for newborns or unborn children must adhere to the aforementioned provisions without deviating from them and offer coverage starting on the day of the child’s birth without imposing any sub-limits, waiting periods, or other restrictions.
The Respondent’s tangential reliance on the advice of the three medical professionals is irrelevant in the current situation since it has been recognized that a pre-term or prematurely born baby qualifies as a “newborn baby.” The timeframe of a newborn’s delivery has no bearing on any illness or harm that results from it.
The insured’s good faith, which is evidenced by consistent premium payments and renewals, cannot be unilaterally exploited by the respondent. In the interests of justice, it is deemed fit and proper to order the Respondent to pay the Petitioner Rs. 11,05,593 plus interest of 18% per annum from the date of refusal, which is December 2018, to the date of actual payment to Petitioner, Additionally, the respondent must pay Rs 5,00,000 for litigation costs due to its refusal to follow its own regulator’s instructions.
Case Commentary:
Doctrine of Disclosure &Uberrima Fides doctrine[21]was made in the Landmark English contract case Carter v. Boehm. whichLord Mansfield established the requirement of the highest good faith, or Uberrimae fide .In this case The governor of Fort Marlborough made an application for insurance against a fort. The likelihood of a French attack on the fort was not disclosed by the governor to the insurer. Once the fort was attacked, the insurance denied a claim, claiming that the fort’s position hadn’t been disclosed, which he considered to be a crucial detail.The court ruled that any concealment or misrepresentation of a significant truth by an insured party will not be permitted, and no amount can be claimed in such a circumstance. An insured must reveal material facts that are in his own knowledge.While in the case of Rita Kirit Joshi v. New India Insurance Company[22], the insured party disclosed all material information necessary for the policy without any deception or concealment, in this instance, the insurer is responsible for paying the claim.
The researcher supports the court’s decision to pay the stipulated sum as well as the associated litigation costs because it has recently been observed in many of the case that insurance companies refuse to pay the insured amount by including ambiguous Exclusionary clauses or by engaging in fraud or misrepresentation. They then assert that the insured failed to comply with the contract’s terms and conditions or failed to interpret the clause in the manner required by law. By citing these examples, they represent themselves as acting in good faith.
In the present case, the insurer refused to pay an amount by stating that premature are not included within the category of new-born and added that their policy did not cover disease or illness for prenatal or preterm born babies The classification made by the insurance company is unreasonable and is not made on rational grounds which breaches the fundamental rights under article 14 and 21 of both mothers as well as of the twin babies. The strategy employed by insurance firms is irrational, unjust, and at odds with the core principles of an insurance policy’s highest good faith.By agreeing to pay the consideration in the form of premiums by the conditions of the policy, the insurance company is primarily trusted to protect/provide against risks that threaten human life and dealings.
Also according to the doctrine of ‘Contra Proferentem’[23], if any clause is considered to be ambiguous then the party who created the flawed clause would be accountable for the draft of such policy. In this case, the insurance company added controversial clause 3.11 after the parties contracted to the terms of the policy. And the insurance company did not inform the petitioner about the same. Hence, the insurance company has to indemnify the insured party for all damages they have suffered as well as for the emotional pain they have experienced.
Hence, in our opinion, the insurer did not classify the difference on any rational grounds, and as a result, the insurer’s epudiation is invalid.
Conclusion:
The pointers in the paper reflect different aspects of insurance policies which are uncertain. By analyzing the judgment and arguments of the case, it can be inferred that the case can be considered a ‘master case’ or can be known as a Landmark judgment for the rights of premature babies. The exclusionary clauses being introduced also add to the differentiation of various parameters which have been dealt with by newborn babies. The judgment of the case can also be used as a reference for different policies of insurance companies. The author also infers that the insurance companies in India have been introducing ambiguous and irrelevant policies which often mislead the insured and end up failing to provide the insurance which leads to losses incurred by the insured. In this case, the insurance company added controversial clause 3.11 after the parties contracted to the terms of the policy. And the insurance company did not inform the petitioner about the same. So, the responsibility lies on the insurance company to compensate for all the losses incurred to her & her family and all the mental distress they had to go through.
Through the judgment of the case, the insurance company denying the insurance for newborn/premature babies under clause 3.11 is not justified in any manner because the very idea of differentiating between premature babies and newborn babies is flawed. The argument posed by the respondents is irrelevant since the differentiation between premature and newborn babies cannot be considered relevant on rational grounds. As discussed above, the coverage for newborn babies was introduced for the very first time in the present year, and the benefit should have been extended for the policyholders without any payment of the premium.
However, it was not fulfilled thus stating its ambiguity in the clause.
By agreeing to pay the consideration in the form of premiums by the conditions of the policy, the insurance company is primarily trusted to protect/provide against risks that threaten human life and dealings. Thus, It can be said that the judgment of the case was righteous and justice was fairly given to the appellant.
[1]Shoshanah Inwood et al., Health Insurance and National Farm Policy, 33 (2018).
[2]Juliette Cubanski & Cristina Boccuti, Medicare coverage, affordability, and access, 39 Generations 26 (2015).
[3]Adriana Camacho & Emily Conover, Effects of subsidized health insurance on newborn health in a developing country, 61 Econ. Dev. Cult. Change 633 (2013).
[4]Rita Kirit Joshi v. New India Assurance Company, 2023 SCC OnLineBom 511
[5]INDIAN CONST. art. 14
[6]INDIAN CONST. art. 21
[7] Indian Contract Act, 1872, § 124
[8] Indian Contract Act, 1872, § 125
[9]INDIAN CONST. art. 12
[10]INDIAN CONST. art. 14
[11]INDIAN CONST. art. 21
[12]RamanaDayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489
[13]Life Insurance Corporation Act 1956
[14]INDIAN CONST. art. 12
[15]Bharat Watch Co. Ltd vs National Insurance Company Ltd, (2019) 6 SCC 212
[16]Insurance Regulatory & Development Authority
[17]Hakim, S. ‘Newborn’ Baby Includes ‘Pre-Mature Baby’: Bombay High Court Directs Insurer To Pay For Expenses Related To Infant’s Care, Imposes ₹5 Lakh Cost. ‘Newborn’ Baby Includes ‘Pre-Mature Baby’: Bombay High Court Directs Insurer to Pay for Expenses Related to Infant’s Care, Imposes ₹5 Lakh Cost. livelaw, (March 2, 2023)https://www.livelaw.in/news-updates/bombay-high-court-newborn-baby-pre-mature-baby-liability-of-insurance-company-pre-and-post-natal-expense-infants-care-222920
[18]INDIAN CONST. art. 12
[19]Jacob Punnen v. United India Insurance Co. Ltd., (2022) 3 SCC 655
[20]Insurance Regulatory & Development Authority
[21]Achampong, F, Uberrima Fides in English and American Insurance Law: A Comparative Analysis.36(2), The International and Comparative Law Quarterly, 329–347 (1987).
[22]Rita Kirit Joshi v. New India Assurance Company, 2023 SCC OnLineBom 511
[23]Duncan, E. E, THE DEMISE OF “CONTRA PROFERENTEM” AS THE PRIMARY RULE OF INSURANCE CONTRACT INTERPRETATION IN OHIO AND ELSEWHERE, 41(4) Tort Trial & Insurance Practice Law Journal, 1121–1140 (2006).