Denied Medical Claim Over ‘Alcohol Use’: Chandigarh Consumer Commission Orders ₹4 Lakh Relief — A Wake-Up Call for Insurers
Author: Amarjeet Singh Panghal | Date: October 7, 2025
Source: The Indian Express Report
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Introduction
In a significant ruling that strengthens consumer rights in health insurance disputes, the District Consumer Disputes Redressal Commission, Chandigarh has directed Star Health and Allied Insurance Company to pay ₹4 lakh to a policyholder whose genuine medical claim was denied on the ground of “alcohol use.”
The case underscores a persistent issue in India’s insurance sector — arbitrary repudiation of health insurance claims using vague exclusion clauses — and reaffirms the legal principle that insurers bear the burden of proof when denying a claim under such exclusions.
Background of the Case
The complainant, Inderjit Singh, a 34-year-old resident of Chandigarh, had a long-standing health insurance policy with Star Health since 2014, with premiums regularly deducted from his salary.
In January 2020, Singh suffered acute necrotizing pancreatitis (ANP) with complications such as acute kidney injury and acute lung injury, for which he was hospitalized at PGIMER, Chandigarh. His total treatment expenditure amounted to approximately ₹4.6 lakh.
However, when he filed a claim, the insurance company rejected it, citing Exclusion Clause No. 8, which disallows claims for illnesses “caused due to the use of alcohol.” The insurer alleged that the pancreatitis was alcohol-induced, and therefore not admissible.
Aggrieved, the policyholder approached the District Consumer Commission, alleging deficiency in service and unfair denial of benefits.
Findings of the Consumer Commission
After hearing both sides, the Commission ruled in favor of the complainant and held the insurer guilty of unfair trade practice and deficiency in service.
Key Observations:
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Lack of Medical Evidence:
The insurer failed to produce any conclusive medical evidence proving that the illness was caused solely by alcohol consumption. The discharge summary from PGIMER did not attribute the disease explicitly to alcohol use. -
Strict Interpretation of Exclusion Clauses:
The Commission reiterated that exclusion clauses in insurance contracts must be interpreted strictly against the insurer. Unless the insurer can clearly establish that the exclusion applies, the claim cannot be rejected. -
Unjust Repudiation:
The Commission found that Star Health had wrongly interpreted the policy terms and repudiated a genuine claim without adequate justification.
Consequently, the insurer was ordered to:
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Pay ₹4,00,000 towards medical expenses,
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Pay ₹10,000 as compensation for mental agony, and
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Pay ₹10,000 towards litigation costs.
Legal Analysis
1. Burden of Proof Lies on the Insurer
Under Indian insurance jurisprudence, when a claim is repudiated on the basis of an exclusion clause, the burden of proof lies squarely on the insurer to establish that the exclusion is validly invoked.
In National Insurance Co. Ltd. v. Jugal Kishore (1988 AIR 719), the Supreme Court held that insurance contracts are to be construed contra proferentem, meaning any ambiguity in policy terms must be interpreted against the insurer who drafted them.
In the present case, the insurer’s reliance on an ambiguous “alcohol-related exclusion” failed to meet this evidentiary standard.
2. Medical Causation Must Be Proved, Not Assumed
“Alcohol use” is often cited as a convenient justification to reject claims for liver or pancreatic diseases. However, such conditions can arise from multiple etiologies — gallstones, genetic predisposition, infections, or autoimmune causes.
Courts and consumer fora have consistently held that insurers must produce specific, expert medical evidence linking the illness directly to alcohol use. Mere suspicion or reference to “habitual drinking” is insufficient.
For instance, in Reliance General Insurance Co. Ltd. v. Nitin S. Shetty (2018), the Karnataka State Commission directed the insurer to settle a similar claim where alcohol use was cited without medical substantiation.
3. Health Insurance as a “Service” under Consumer Law
The Consumer Protection Act, 2019 classifies health insurance as a “service.” Therefore, denial of a genuine claim amounts to deficiency in service under Section 2(11) of the Act.
Consumers can approach the:
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District Commission for claims up to ₹50 lakh,
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State Commission for ₹50 lakh–₹2 crore, and
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National Commission for claims above ₹2 crore.
This case reaffirms that consumer forums remain a robust mechanism for policyholders to challenge unfair claim denials.
4. Doctrine of Utmost Good Faith
Insurance contracts operate on the doctrine of uberrima fides (utmost good faith) — binding both parties. While policyholders must disclose material facts truthfully, insurers are equally bound to act in good faith, fairly interpreting terms and avoiding exploitative denials.
In Life Insurance Corporation of India v. Asha Goel (2001), the Supreme Court observed that insurance companies must not take technical shelter under ambiguous policy terms to defeat legitimate claims.
Broader Implications
For Insurers:
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Claim repudiation must be backed by concrete evidence and not assumptions.
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Exclusion clauses should be clearly worded, transparent, and communicated at policy inception.
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Arbitrary or unverified denial invites penalties for mental harassment and litigation costs.
For Policyholders:
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Maintain complete medical documentation, including discharge summaries and specialist opinions.
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Carefully review exclusion clauses when purchasing or renewing policies.
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Challenge repudiations that appear arbitrary or lack substantiated reasoning.
For Regulators (IRDAI):
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The Insurance Regulatory and Development Authority of India (IRDAI) should consider clearer norms for the interpretation of exclusion clauses related to lifestyle diseases or substance use.
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There is a growing need to audit claim rejection practices and penalize insurers for unjustified repudiations.
Conclusion
The Chandigarh Consumer Commission’s ruling is more than a local case — it is a reminder that health insurance must serve the insured, not shield insurers from accountability.
By holding Star Health accountable, the Commission has reinforced the fundamental principle of fairness in insurance contracts. This decision should embolden consumers to assert their rights and encourage insurers to act with greater transparency, empathy, and evidence-based reasoning.
#ConsumerRights #InsuranceLaw #StarHealth #Chandigarh #HealthInsurance #ConsumerProtectionAct #LegalAwareness #IRDAI #PublicRightAction
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