Sudhir Kumar Katriar, J.
1. This writ petition has been preferred for a direction to the respondent Oriental Insurance Company Limited to renew the mediclaim policy of Anjani Kishore Prasad deceased (hereinafter referred to as the 'Insured') with effect from 4.12.2004 till the date of his death on 5.5.2006.
2. The arguments in the writ petition had concluded on 19.4.2006 and the judgment had been reserved for consideration. Shortly before the judgment could be pronounced, the insured died on 5.5.2006, whose heirs have been brought on record by order dated 19.05.2006. Petitioner No. 1 is the widow of the insured, and petitioner Nos. 2 to 4 are that r daughters.
3. According to the writ petition, the insured had obtained a mediclaim policy covering the period 4.12.1996 to 3.12.1997, Photo copies of the money receipt dated 4.12.1996, showing payment of the premium amount, and that of the policy described as 'Hospitalisation and Domiciliary Hospitalisation Benefit Policy', are marked Annexure-1 series. The policy was renewed year after year till 3.12.2004. It is further stated in the writ petition that one P.N. Opadhyay, the Company Agent, was regularly collecting the premium amount, and the original policy was accordingly renewed without the necessity of issuing a fresh document. In April 2003, the insured was diagnosed for Non Hodgkins Lymphoma of the abdomen, i.e. cancer of the abdomen. The insured informed the company of his illness on 8.4.2003. He was administered chemotherapy and radiotherapy and raised medical claim for reimbursement which was settled and paid on 11.2.2004. in the meantime, the policy was renewed for the period 4.12.2003 to 3.12.2004, being the last one. It is further stated in the writ petition that he was waiting for arrival of the Company Agent to collect the premium for renewal of the policy for the following period, namely, 4.12.2004 to 3.12.2005, but did not turn up. The insured, therefore, wrote his letter dated 14.5.2005 (Annexure-2) that P.N. Opadhyay, the Agent, had informed that the policy cannot be renewed as per higher level instruction. He, therefore, requested the Divisional Manager of the Company to renew the policy with retrospective effect. The insured did not receive any reply and he, therefore, sent his reminder dated 13.7.2005. The company did not send any reply to the same leading to the present writ petition.
4. The respondents have placed on record their counter affidavit and have opposed the writ petition, It is stated in the counter affidavit that Section 24 of the General Insurance Business (Nationalisation) Act 1972 (hereinafter referred to as the '1972 Act') provided that the Corporation and acquiring companies including the respondent company shall have exclusive privilege of carrying on general insurance business in India. The Insurance Regulatory and Development Authority Act 1999 (hereinafter referred to as the '1999 Act') was enacted by the Parliament for establishment of authority to protect the interest of holders of insurance policies to regulate, promote, and ensure orderly growth of the insurance industry, and was in force in 2002. Under Section 32 of the third schedule of the 1999 Act, Section 32A was inserted in the 1972 Act which provided that the exclusive privilege of corporation and acquiring companies of carrying on general insurance business in India shall cease on and from the commencement of the 1999 Act, and they shall thereafter carry on general insurance business in accordance with the provisions of the Insurance Act 1938 (hereinafter referred to as the '1938 Act'). The insured had taken a mediclaim policy known as 'Hospitalisation and domiciliary Hospitalisation Benefit Policy'. Condition No. 11 of the mediclaim policy, inter alia, provided that the company shall not be bound to renew the policy and may at any time cancel the policy. It is further stated in the counter affidavit that in view of the terms and conditions of the mediclaim policy, the company is not duty-bound to renew the policy more so when the policy had already lapsed. During the subsistence of the policy, the insured suffered from Cancer, reimbursement of the treatment charges to the tune of Rs. 1.5 lacs was paid. It is further stated that the policy lapsed in December 2004, and the insured did not take steps in time for its renewal. It is further stated that the agent is the paid staff of the company and, therefore, lapses of the agent would be confined, to the agent himself and the insurance company cannot be saddled with any liability occurring and attributable to the agent. The letter for renewal vide Annexures 2 and 3 were received after the policy had lapsed and, therefore, the insurer cannot be compelled to issue the policy, particularly in a situation when it had become known that the insured was suffering from Cancer. It is further stated that after lapse of the policy, issuance of a fresh policy may not be possible to cover a pre-existing disease.
5. While assailing the validity of the impugned action, learned Counsel for the petitioner submitted that, at the time of commencement of the policy, the company had monopoly over the business of general insurance and the insured seeks renewal of a pre-existing policy. It is a welfare state and such policies are meant to take care of the health of the citizens and, therefore, the company should take care of the ailments of the citizens rather than to insure only healthy persons. It was a case of renewal of policy and, therefore, the company was duty bound to ensure its renewal provided the insured was willing to pay the prescribed premium. He relied on the judgment of the Supreme Court reported in : (2001)6SCC477 Biman Krishna Bose v. United India Insurance Company Limited and Anr. He next submitted that the company is a public sector undertaking and should be inspired by a higher duty to act fairly and free from arbitrariness. He relied on a Division Bench judgment of the Gujarat High Court reported in A.I.R. 2004 Gujarat 191 United India Insurance Company Limited and Anr. v. Mohanlal Aggarwal. He next submitted that the company is bound by the acts of omission and commission of its agent and cannot be permitted to take advantage of the shortcomings of its agent. He relied on the judgment of the Supreme Court reported in : AIR2005SC3087 Chairman, Life Insurance Corporation and Ors. v. Rajiv Kumar Bhasker. He next submitted that the company should not engage itself in contrivance to achieve non-renewal of a subsisting policy. It was the duty of the agent to take steps for renewal or to inform the insured that the policy shall not be renewed as per Clauses (e), (g) and (h) of the Code of Conduct under the Regulatory Authority Regulations 2000.
6. Learned Counsel for the respondents has opposed the writ petition and submitted that the policy in question was year-wise and the insured had to obtain renewal at the right time with offer of the premium amount. The first offer of the insured was by letter dated 14.5.2005 (Annexure-2), followed by letter dated 13.7.2005 (Annexure-3) It is incorrect to state that the company purposely refused to renew the policy for the period in question. The company has really refused to renew the same because the insured approached the company belatedly. She next submitted that it is incorrect to state that the policy could not be renewed on account of negligence attributable to the agent. The agent's main function is to initiate business and his obligation came to an end with commencement of the policy. Renewal is not his duty. The Code of conduct for agent, which is statutory in character, does not put any duty on agent to have it renewed. Learned Counsel for the respondents also submitted that the guidelines provided that the policy has to be renewed by mutual consent, company is not bound to notify that the policy is due for renewal, the policy is binding on all and the entire duty is on the insured to have it renewed in time. Counsel has tried to distinguish the judgment of the Supreme Court in Biman Krishna Bose (supra).
7. I have perused the materials on record and considered the submissions of learned Counsel for the parties. It appears that the company's agent, had approached the insured who he had accordingly taken the mediclaim policy for the period 4.12.1996 to 3.12.1997. It further appears to me that the agent thereafter on his own and voluntarily approached the insured year after year for renewal of the policy and obtained the cheque of the premium amount for its renewal upto the period 4.12.2003 to 3.12.2004, being the last one. The agent collected the premium amount on all occasions, and renewal of the policy was evidenced by the money receipt without the necessity of issuing a fresh policy. In other words, the terms and conditions of the first policy (Annexure-1) continued to govern the parties year after year in view of payment of the premium amount for the fresh period collected by the agent. It further appears that the insured was in 2003 afflicted by a serious illness which was diagnosed at All India Institute of Medical Sciences, New Delhi, as Non Hodgkins Lymphoma of the abdomen, described in common parlance as cancer of the abdomen, and had undergone chemotherapy and radiotherapy. The insured had informed the company of the illness on 8.4.2003. He lodged his claim on 26.8.2003 and his claim for Rs. 1.50 lacs was paid on 11.2.2004. Contrary to the practice to which the insured was made accustomed by the agent acting on behalf of the company, the agent did not turn up to collect the premium amount for the following period, namely, 4.12.2004 to 3.12.2005. The insured was at this stage in a critical state of health, was undergoing chemotherapy and radiotherapy and suffering excruciating pain, and must have been waiting for arrival of the agent while remembering God all the while in the sullen and morbid solitude of his room. During those trying times, it may not have occurred to him to contact the authorities on account of non-arrival of the agent. He must not have expected that the agent at the behest of the company would engage himself in a subterfuge so that the policy lapses enabling the insurance company to take the plea that the premium amount was not paid in time and, in accordance with the terms and conditions of the policy, they would not cover a pre-existing illness. So much for the organised planning of the Company and the agent to defeat a cancer-ridden patient who had already paid premium eight times. The insured had ultimately written his letter dated 14.5.2005 (Annexure-2) to the Divisional Manager, informing him that steps have not been taken by the agent of the company for renewal of the policy. P.N. Opadhyay, the agent, had informed him that he had instruction from the higher level that the policy shall not be renewed. The insured had, therefore, requested that the policy may be renewed with retrospective effect. The company did not reply to the same. It was, therefore, followed by the second letter of the insured of 13.7.2005 (Annexure-3). The insured did not receive a reply to the same and has ultimately died during the pendency of the present proceedings on 5.5.2005, necessitating substitution of his widow and daughters. While objecting to the substitution application, the company stated in its rejoinder that 'the widow and heirs of the deceased petitioner are in no way concerned with the claimed herein.' I wish the company had acted fairly in renewing the policy, rather than surreptitiously informing the agent to refrain from approaching the insured and, at the very minimum, ought to have informed the insured that they were unwilling to renew the policy because of the disease that had afflicted the insured during the currency of the policy. The company would have equally thought of informing the agent that its statutory duty is to insure the healthy citizens of the country only, and is committed to decline to cover the diseased and the sick.
8. The company has taken the stand in its counter affidavit and indeed reiterated by the learned Counsel for the respondents during the course of oral submissions that the duty of the agent is confined to initiation of the first policy and thereafter no duty is on him to take steps for renewal. If that were so, how and why did the agent approach the insured, collected the premium amount, the company did accept the same from the agent and renewed the policy, year after year. Was it because the agent was receiving his commission on the premium amount, and the company was perennially receiving business. Are we permitted to take judicial notice of the aggressive and commercial approach and marketing pursued by the agents.
9. In view of the conduct of the consistent conduct of the agent and the company, I am of the view that the dealings between the insured and the company were to be through the agent. The insured cannot be made to suffer the consequences arising out of the sharp practice of the company. The agent was duty bound to approach the insured in the manner it had been doing and ensure its renewal. In case the agent had instructions from the company not to take steps for renewal, then he as well as the company were duty-bound to inform the insured that the policy shall not be renewed for the reasons to be indicated in the communication.
10. In so far as this aspect of the matter is concerned, I conclude that in view of the protracted and consistent relationship between the insured, the agent, and the company, the conduct of the parties, and the mode and manner in which the policy was being renewed with the active intervention of the agent year after year, it was his bounden duty to ensure renewal of the policy for the period 4.1.2.2004 to 3.12.2005, rather than engage himself in collaboration with the company to purposely keep away from the insured to ensure that the policy lapsed, or else to inform him well in time that he had instructions not to approach him, so that the insured could have approached the company directly in time for renewal. It was equally the obligation on the part of the company to inform the insured in time that they have decided not to renew the policy. On the authority of the judgment of the Supreme Court in the case of Chairman, Life Insurance Corporation v. Rajiv Kumar Bhasker (supra), I have no hesitation in concluding that the court would be entitled to conclude that such a relationship was in existence between the parties in the present case.
11. Is the company under any impression that it shall insure only the healthy ones and it has no statutory and social duty to take care of the diseased citizens of this country. If that were so, it would militate against the basic aims and objects of the 1972 Act. It was after all to take care of the lack of concern and solicitude, and the commercial approach, at the hands of the private operators under the 1938 Act, and to suppress the mischief, that those were nationalised by the 1972 Act to come to the aid and help of the ailing citizens of this country. Never could the Parliament have imagined that the company, being a public-sector undertaking and being an arm of the Central Government, would ever engage itself in a contrivance like the one to ensure that the policy of a Cancer-Stricken patient would not be renewed, to enable it to take the indefensible position that a fresh policy covering a pre-existing disease is not possible. I record my extreme sense of displeasure at the unfair approach of the company in torturing the insured and defeating the aims and objects of the Act.
12. Learned Counsel for the petitioner has rightly relied on the judgment of the Supreme Court in Biman Krishna Boss v. United India Insurance Co. Ltd. and Anr. (supra), which was a comparable case and the insurance company had refused to renew the policy, inter alia, on the ground that the petitioner had engaged himself in litigation against the company. The Supreme Court considered it to be an irrational and arbitrary ground. Renewal of an insurance policy means repetition of the original policy. If we take the view, the Supreme Court observed, that the mediclaim policy cannot be renewed with retrospective effect, it would give handle to the Insurance Company to refuse renewal of the policy on extraneous considerations thereby deprive the claim of the insured for treatment of diseases which have appeared during the relevant time and further deprive the insured for all time to come to cover those diseases under an insurance policy by virtue of the exclusion clause. This being the disastrous effect of wrongful refusal of renewal of the insurance policy, the mischief and harm done to the insured must be remedied. Once it is found that the act of an insurance company was arbitrary in refusing to renew the policy, the policy is required to be renewed with effect from the date when it fell due for its renewal. In that view of the matter, the Supreme Court directed the insurance company to accept the premium and renew the policy with effect from the renewed date with the same terms and conditions.
12.1 I must at this stage note one difference between the facts of the reported judgment and the present case. That was a case where the petitioner had forwarded the premium amount in time which, according to the insurance company, has not been done in the present case. In view of the discussion in the preceding paragraph that the insurance company and the agent had conspired with each other in ensuring that the policy lapsed on account of non-payment/non-receipt of the amount of premium, We cannot permit the insurance company, a public-sector undertaking acting in public interest under an Act of parliament and inspired by Article 47 and 21 of the Constitution, to create such handles for itself.
13. The petitioners case is squarely covered by an exhaustive judgment of a Division Bench of the Gujarat High Court in United India Insurance Company Ltd., and Anr. v. Mohanlal Aggarwal (supra). The Division Bench has held that even after insertion of Section 24A of the Act of 1972 (in force with effect from 19.4.2000), the exclusive privilege of the company and its subsidiary in carrying on general insurance business in India has been removed. However, despite entry of private companies in the field, these Government companies cannot overlook the underlying object of their formation and the constitutional obligation to act in a fair and reasonable manner without arbitrariness, in providing cover to persons in the field of general insurance. It is the statutory duty of these Government Insurance Companies 'to carry on general insurance business' and to so function under the Act 'as to secure that general insurance business is developed to the best advantage of the community'. After all, public health cannot be thrown to the mercy of any arbitrary freedom of private contracts, because the very nature of contracts involving health insurance is not a matter of mere private concern of two contracting parties, but operates in a public field where concerns of community interest have to be read in such transactions, in the regulatory field. The provisions of the Act of 1999 and the nature of regulation and control exercised thereunder show that the general insurance business is not left to the exclusive domain of a purely private contract of two individuals not involving any public interest. The constitutional and statutory provisions regulate these insurance contracts and the interest of the community is kept paramount in consonance with the Directive Principles of State Policy. Quoting the observations of the Five Year Plan of our country, the Gujarat High Court observed that health care schemes including Mediclaim are devised to ease the financial burden of the high costs of hospitalization on the low and middle income group population. This would enable such persons, who are covered by such health insurance schemes to avail of a better quality of medical services which otherwise might be out of the reach of such persons. The Mediclaim Scheme is, therefore, not a subject of mere private concern of two contracting parties, but a result of national concern reflected in the norms of national health policy.
14. Any tendency to undertake risk selection so as to insure low-risk individuals and exclude the high risk ones from insurance via exclusion conditions would' impose a heavy financial burden on the people who are prone to get sick and most in need of risk protection, obyiously works against the constitutional perspective. Public Health Insurance Schemes have, therefore, to be safeguarded against such tendencies that may be disguised under a refined argument of business or commercial prudence.
15. A bare reading of the exclusionary provisions in the policy shows that only in respect of the diseases/injuries which are pre-existing 'when the cover incepts for the first time', the liability of the company will be excluded. This would mean that the liability in respect of the disease/injury occurring during the continuance of the cover without break will remain. The Gujarat High Court, therefore, concluded that a party to the contract cannot disown the liability under the contract by cancelling it. The insurer is under a duty to accept the renewal premium paid in time because of the standing offer to renew implied in various clauses of the policy and expressly stipulated under Clause 11 of the prospectus, which standing offer can be accepted by timely payment of the renewal premium. The cancellation Clause 5.9 of the policy stating that the policy may be cancelled by giving 30 days' notice will have to be read in the context of the grounds mentioned in Regulation 7(1)(m) of the Protection of Policy Holders' Interests Regulations 2002, which provides that cancellation can be made only on grounds of misrepresentation, fraud, non-disclosure of material facts or non-cooperation of the insured.
16. The Gujarat High Court found there was neither express nor implied term in the contract of Mediclaim Insurance that, on the contract becoming more onerous or burdensome, the insurer can refuse renewal of policy despite timely tender of renewal premium by the insured. Parties to a contract- are bound to perform their obligations undertaken by them and cannot claim to be excused by the mere fact that performance has subsequently become more burdensome. A party cannot be absolved from Viability to perform a contract merely because the performance becomes more onerous. (See Alopi Parshad and Sons Ltd. v. Union of India reported in : [1960]2SCR793 ). Refusal would, however, be justified on the grounds such as fraud, misrepresentation, non-fulfilment of the obligations by the insured, or where the performance of obligation under the contract to renew the policy as stipulated is dispensed with or excused under the provisions of the Indian Contract Act or of any other law.
17. It is a settled legal position that where, after every effort to reconcile more than two clauses of contract of insurance appear plainly in conflict, it is necessary to consider the comparative weight to be given to each of them. In such cases, one of the rules applicable to determine which clause shall prevail is that the policy should be construed strongly against the insurers. In case of ambiguities in a policy, the rule is that the policy being drafted in a language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentes (Verba cartarum fortius accipiuritur contra proferentem i.e. words are to be interpreted most strongly against him who uses them), against those who offer it. The insured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might have reasonably understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt. (Lord Russel of Killowen in Provincial v. Morgan (1933) AC 240, 250).
18. The health insurance contract is related to the category of life contracts. A life contract would obyiously include the natural process of dying and a health insurance contract would obyiously include what may be inevitable illness, which perils would be covered by the insurance. In a normal contract of life assurance as distinct from contracts intended to be for a term certain, the assured must have, at least a right of renewal subject to reasonable conditions, A policy of health insurance is for insuring against the risk of disease. One is a policy for life while the other for a healthy life. Even in a health policy, though under an annual contract on payment of annual premium, the assured must have a right of renewal subject to reasonable conditions, because the policy is not intended to be for a term certain, but meant to cover the risk of disease for life so long the renewal premium is paid in time, as per the renewal clause. The contract of health insurance, like that of life insurance made in consideration of an annual premium, is an insurance for a year with an irrevocable offer to renew upon payment of the agreed renewal premium.
19. The contention that once the disease occurs it ceases to be an uncertain event and, therefore, there can be no insurance of the disease that occurs during the period of the existing policy mocks at the very concept of health insurance and the public welfare scheme like the Mediclaim Insurance Scheme. At the time when the insurance cover incepts, the pre-existing diseases are not covered, and, therefore, they being covered during the duration of the policy at any stage so long as it is renewed, cannot be considered to be a known event existing at the time when the cover first incepts.
20. It thus appears to me that the company and the agent conspired to ensure that the Mediclaim lapsed with effect from 4.12.2004, So long the Insured is willing to pay the premium amount for renewal of pre-existing policy, the insurer has no option but to renew the policy. The insured was always willing to pay the premium amount for renewal of the policy. In view of the unfortunate demise of the insured during the pendency of the present proceedings, the prayer is now confined to renewal of the mediclaim policy for the period 4.12.2004 to 3.12.2005, and 4.12.2005 to 5.5.2006. The company shall depute its agent to collect the premium amount for the former period, and at the pro-rata basis for the latter period, from petitioner No. 1 (Smt. Purnima Prasad), the widow of the insured, within a period of eight weeks from today. The company shall make payment of the claims as per the established procedure to petitioner No. 1 within a period of four-weeks of the date of receipt of the claim.
21. The writ petition is accordingly allowed with costs quantified at rupees ten thousand. Let a copy of this judgment be handed over to learned Counsel for the petitioners forthwith.