Insurer Cannot Deny Treatment Claim Merely For Lack Of Hospitalisation: Karnataka HC [Read Order]

Bengaluru: The Karnataka High Court has dismissed a writ petition filed by National Insurance Co. Ltd. challenging a Permanent Lok Adalat award that directed the insurer to reimburse a retired bank officer's medical expenses towards two post-chemotherapy injections administered for advanced prostate cancer. 

Justice Suraj Govindaraj held that the injections, though administered without hospitalisation, remained connected to the insured disease and could not be excluded from coverage merely because medical advancement had made hospitalisation unnecessary.

The petition arose out of a claim by Padmanabha Shetty G, a retired officer of the erstwhile Vijaya Bank, which later merged with Bank of Baroda. Shetty was covered under a health insurance scheme formulated by the Indian Banks' Association for retired employees of member banks, with annual coverage of Rs.9,00,000 for the period from 01.11.2021 to 31.10.2022. He was diagnosed with Stage IV carcinoma of the prostate and underwent chemotherapy at HCG Hospital, Bengaluru, following which he was advised to continue two injections, Zoladex and Xgeva, once every three months.

While the insurer reimbursed the expenses incurred during Shetty's hospital admissions, it declined to reimburse Rs.2,85,470 incurred towards the Zoladex and Xgeva injections, contending that their administration did not require hospitalisation and therefore amounted to out-patient treatment falling outside the policy's coverage. Aggrieved, Shetty invoked Section 22-C of the Legal Services Authorities Act, 1987 before the Permanent Lok Adalat at Mangaluru, which was registered as Dispute No.761/2022.

The Permanent Lok Adalat, after recording failure of conciliation between the parties, proceeded to adjudicate the dispute and, by order dated 20.09.2023, directed payment of Rs.2,85,470 with 6% interest along with Rs.25,000 as compensation. On an application filed by Bank of Baroda under Section 152 of the Code of Civil Procedure, the Permanent Lok Adalat modified its order on 10.01.2024 to clarify that the liability to pay rested with the insurer rather than the bank.

Before the High Court, Sri Devaiah I.S., counsel for the petitioners, argued that Section 22-C makes conciliation a mandatory stage before adjudication, and that the Permanent Lok Adalat had erred in treating conciliation as exhausted merely because the parties did not appear, without making a meaningful effort to facilitate settlement. He sought a remand for a fresh conciliation exercise. On merits, he relied on Clauses 2.10 and 2.19 of the policy, defining “Day Care Treatment” and “Hospitalisation” respectively, to contend that since the injections were administered without general or local anaesthesia and without requiring hospitalisation, the expenditure fell outside the scope of coverage.

During the hearing, the Court enquired whether the petitioners were willing to make any settlement offer given the passage of time. Learned counsel, on instructions, categorically submitted that the petitioners were unwilling to offer any amount, maintaining that they bore no liability whatsoever for the Zoladex and Xgeva injections.

Sri Ranjan Shetty, counsel for the respondent, submitted that the two injections were prescribed by the treating doctors as a continuation of the chemotherapy administered for Stage IV prostate cancer, and were not medicines for any unrelated ailment. He explained that Zoladex, the trade name for Goserelin Acetate, is used as hormonal therapy to suppress testosterone and deprive prostate cancer cells of the stimulation needed for growth, while Xgeva, the trade name for Denosumab, is used to reduce the risk of skeletal complications in patients with advanced cancers involving the bone. He argued that the distinction drawn by the insurer between treatment during hospitalisation and treatment administered subsequently on an outpatient basis was artificial, and that the absence of hospitalisation, which was owed only to advances in medical science, could not convert medically necessary cancer treatment into something outside the policy's coverage.

On the question of remand, the Court held that while conciliation is an important and integral component of the statutory scheme under Section 22-C, no useful purpose would be served by remanding the matter when the petitioners had categorically refused to consider any settlement and maintained that no amount was payable at all. The Court observed that conciliation cannot be converted into a process where one party is compelled to persuade the other to abandon a claim it considers legally sustainable, and that remitting the matter at this stage, after proceedings had remained pending since 2022, would only cause further delay without serving the object of the legislation.

On the merits, the Court held that hospitalisation is not an end in itself but merely a mode of administering treatment, and that where advances in medical science permit a treatment which would otherwise have required prolonged hospitalisation to be administered safely without it, the absence of hospitalisation cannot by itself determine whether the treatment is connected to the insured disease. The Court observed that accepting the insurer's interpretation would lead to the anomalous result of coverage being denied not because the treatment was unrelated to the insured disease, but because modern medical practice had rendered hospitalisation unnecessary. It further noted that there was no suggestion Shetty had avoided hospitalisation to defeat the policy's terms, and that the very nature of the injections meant hospitalisation was not medically necessary in the first place.

Finding that the Permanent Lok Adalat's award did not suffer from any jurisdictional or legal infirmity warranting interference under Articles 226 and 227 of the Constitution, the Court dismissed the writ petition, imposing a nominal cost of Rs.50,000 payable by the petitioners to the respondent within 30 days, and directing payment of the amounts awarded by the Permanent Lok Adalat, along with up-to-date interest, within the same period.

Appearances: 

Sri Devaiah I.S. appeared as counsel for the petitioners-insurer, while Sri Ranjan Shetty appeared for respondent No.1, Sri Kashyap N. Naik appeared for respondent No.2, and Sri Vignesh Shetty appeared for respondents No.3 and 4.

Case Title: M/s National Insurance Co. Ltd. & Anr. vs. Mr. Padmanabha Shetty G & Others

[Read Order]