Cashless claim rejected due to PED

Opinion: Wrongful Repudiation of Cashless Mediclaim, Deficiency of Service

Short Answer

Yes. On the facts as stated, there is a strong, multi-pronged case of deficiency of service under Section 2(11) of the Consumer Protection Act, 2019 against the insurer. The case is unusually strong because it combines (i) a substantive defect (PED rejection without medical evidence, contrary to settled SC and NCDRC law), (ii) procedural defects under the IRDAI Master Circular on Health Insurance Business dated 29 May 2024, and (iii) a fact pattern (cashless denial → forced shift to government hospital → death) that closely mirrors recent State Commission decisions awarding the policyholder.

The insurer's reconsideration of its own denial, without producing any new medical evidence, compounds the deficiency rather than cures it.

What the consumer fora will award: the contractual sum (medical expenses incurred at both hospitals), interest from the date of repudiation, compensation for mental agony, and litigation costs. What they will not award: damages for the death itself ("loss of life"), which lies outside the consumer-forum jurisdiction (see Section 6 below).

1. The Standard for "Deficiency of Service"

The settled Supreme Court formulation comes from Ravneet Singh Bagga v. KLM Royal Dutch Airlines, (2000) 1 SCC 66:

"The deficiency in service cannot be alleged without attributing fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be performed by a person in pursuance of a contract or otherwise in relation to any service. ... If on facts it is found that the person or authority rendering service had taken all precautions and considered all relevant facts and circumstances in the course of the transaction and that their action or the final decision was in good faith, it cannot be said that there had been any deficiency in service."

Ravneet Singh Bagga v. KLM Royal Dutch Airlines, (2000) 1 SCC 66 (Open).

The contrapositive matters: a decision not taken in good faith, or taken without considering the relevant medical material, does amount to deficiency. A repudiation that is "illegal and not in accordance with law" is itself the deficiency, as the Supreme Court held in the landmark mediclaim case below.

In Manmohan Nanda v. United India Assurance Co. Ltd., (2022) 4 SCC 582 (Nagarathna J., for a Bench with Chandrachud J.), the Court held:

"Hence in the instant case, the repudiation of the policy by the respondent insurance company was illegal and not in accordance with law. Consequently, the appellant is entitled to be indemnified under the policy."

Manmohan Nanda v. United India Assurance Co. Ltd., (2022) 4 SCC 582, ¶70 (Open).

The same Bench reaffirmed the insurer's duty:

"The object of seeking a mediclaim policy is to seek indemnification in respect of a sudden illness or sickness which is not expected or imminent ... If the insured suffers a sudden sickness or ailment which is not expressly excluded under the policy, a duty is cast on the insurer to indemnify the appellant for the expenses incurred thereunder."

Manmohan Nanda, ¶69 (Open).

2. The Insurer's Burden to Prove "Pre-Existing Disease"

This is the central battleground in your case. The law is overwhelmingly in your client's favour.

2.1 Burden of Proof on the Insurer (Section 101, Evidence Act)

The Supreme Court in Mahakali Sujatha v. Future Generali India Life Insurance Co. Ltd., (2024) 8 SCC 712 (Nagarathna J.), authoritatively held:

"we may also dilate on the aspect of burden of proof. Though the proceedings before the Consumer Fora are in the nature of a summary proceeding. Yet the elementary principles of burden of proof and onus of proof would apply. ... Section 101 of the Evidence Act, 1872 states that whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist ... the burden of proving a fact always lies upon the person who asserts the same. Until such burden is discharged, the other party is not required to be called upon to prove his case."

Mahakali Sujatha, ¶41 (Open).

"The cardinal principle of burden of proof in the law of evidence is that 'he who asserts must prove' ... The onus cannot be shifted on the appellant to deal with issues that have merely been alleged by the respondents, without producing any evidence to support that allegation."

Mahakali Sujatha, ¶50 (Open).

Although Mahakali Sujatha arose in a life-insurance non-disclosure context, the burden-of-proof articulation is in general terms and was expressly applied to a mediclaim PED dispute by the NCDRC in Mahipal Chaudhary (next paragraph).

2.2 "Cogent and Reliable Evidence" Required, Discharge-Summary Entry Insufficient

The most directly on-point recent authority is Mahipal Chaudhary v. Max Bupa Health Insurance Co. Ltd., NCDRC, Revision Petition No. 829 of 2018, decided 6 November 2024 (Dr Inder Jit Singh, Presiding Member):

"the only document/evidence, on which reliance is placed by the Respondent Insurance Company in support of their contention of suppression of material fact relating to pre-existing ailments [is] the Discharge Summary ... A careful perusal of this document shows that this records the symptoms of the patient at the time of admission, as told by the patient/their family members. There is no other document/evidence on record which will show that the insured was suffering from pre-existing ailment ... we are of the considered view that the Respondent Insurance Company has failed to discharge its onus of proving suppression of material facts related to pre-existing ailments with any cogent and reliable evidence/proof. ... benefit of doubt goes to the insured of her having no knowledge ... prior to taking mediclaim policy."

Mahipal Chaudhary v. Max Bupa Health Insurance Co. Ltd., NCDRC (Open).

The NCDRC restored the District Forum's award of ₹16,06,946 with 9% interest and expressly built its reasoning on Channabasamma, Manmohan Nanda, and Mahakali Sujatha.

2.3 Symptoms Unknown to the Insured Are Not "Pre-Existing"

The NCDRC's foundational PED authority, cited 36 times since, is Praveen Damani v. Oriental Insurance Co. Ltd., II (2006) CPJ 189 (NC):

"If this interpretation is upheld, the Insurance Company is not liable to pay any claim, whatsoever, because every person suffers from symptoms of any disease without the knowledge of the same. This policy is not a policy at all, as it is just a contract entered only for the purpose of accepting the premium without the bonafide intention of giving any benefit to the insured under the garb of pre-existing disease."

Praveen Damani v. Oriental Insurance Co. Ltd. (Open).

"Since there were no symptoms, the question of linking up the symptoms with a disease does not arise. ... it would be difficult to arrive at the conclusion that the insured had suppressed the pre-existing disease."

Praveen Damani (Open).

2.4 Lifestyle Conditions Are Not "Pre-Existing Disease"

If the alleged PED is hypertension, diabetes or a routine cardiac risk factor, the position is even stronger. Delhi SCDRC in Smt. Surilla Mathur v. Oriental Insurance Co. Ltd. (FA No. 26/2015, decided 2 December 2024) held:

"the common lifestyle disease like diabetes and hypertension, cannot be treated as pre-existing diseases, therefore, cannot be a ground of repudiation of the claim by Insurance companies."

Surilla Mathur v. Oriental Insurance, Delhi SCDRC (Open).

This aligns with Clause 5, Chapter VI of the IRDAI Master Circular on Standardization of Health Insurance Products dated 22 July 2020, which prohibits any waiting period exceeding 90 days for hypertension, diabetes or cardiac conditions unless declared and accepted as PED at underwriting.

2.5 Conditions Detected for the First Time During the Hospitalisation Are Not PED

In Manmohan Nanda, the Supreme Court held that a condition (hyperlipidaemia) diagnosed for the first time during the very episode of treatment is not a PED:

"There was no intention to suppress any material fact by the appellant at the time of filling the proposal form as the appellant had no knowledge that he was suffering from hyperlipidaemia ... when the proposal form was filled by him."

Manmohan Nanda, ¶316 (Open).

The Court applied the contra proferentem rule against the insurer:

"The aforesaid clause has to be read against the respondent insurer by applying the contra proferentem rule against it. Otherwise, the very contract of insurance would become meaningless."

Manmohan Nanda, ¶68 (Open).

3. The IRDAI Regulatory Architecture: Procedural Deficiencies

The 2024 reform package gives you a powerful set of procedural pegs that did not exist a few years ago. Three failures, on the facts you describe, look stark.

3.1 The 1-Hour Cashless Authorisation Rule

The IRDAI Master Circular on Health Insurance Business dated 29 May 2024 (Ref. IRDAI/HLT/CIR/PRO/84/5/2024), Para 15, mandates:

"Every insurer shall strive to achieve 100% cashless claim settlement in a time bound manner. The insurers shall endeavor to ensure that the instances of claims being settled through reimbursement are at bare minimum and only in exceptional circumstances. ... Insurer shall decide on the request for cashless authorization immediately but not more than one hour of receipt of request."

Source: IRDAI Master Circular on Health Insurance Business, 29 May 2024 (Document Detail).

If the cashless rejection took longer than one hour, that is itself a regulatory breach.

3.2 No Repudiation Without PMC / Claims Review Committee Approval

The same Master Circular, Para 17, requires:

"No claim shall be repudiated without the approval of PMC [Product Management Committee] or a three-member sub-group of PMC called the Claims Review Committee (CRC). ... In case the claim is repudiated or disallowed partially, details shall be conveyed to the claimant along with full details giving reference to the specific terms and conditions of the policy document."

Demand a copy of the CRC minutes through your Section 39 CPA 2019 reply / RTI to the insurer's Grievance Redressal Officer. A repudiation letter that does not record CRC approval is procedurally infirm and that infirmity is independently citable.

3.3 Reasoned Repudiation by the Insurer (Not the TPA), Pegged to a Specific Policy Clause

Regulation 33(d)(iv) of the IRDAI (Health Insurance) Regulations, 2016 (still the operative source for this principle, cross-confirmed by Para 17 of the 2024 Master Circular) provides:

"Where a claim is denied or repudiated, the communication about the denial or the repudiation shall be made only by the Insurer by specifically stating the reasons for the denial or repudiation, while necessarily referring to the corresponding policy conditions."

A bare assertion of "PED" without identifying the disease, the diagnostic basis, or the contemporaneous medical record is non-compliant with both regimes.

3.4 The Statutory PED Definition Itself

PED is a defined term. Schedule III, Clause 1.6 of the IRDAI (Insurance Products) Regulations, 2024 defines PED as a condition that is either (a) "diagnosed by a physician not more than 36 months prior to the date of commencement of the policy", or (b) for which "medical advice or treatment was recommended by, or received from, a physician not more than 36 months prior". Without a contemporaneous physician diagnosis or medical advice within the 36-month pre-policy window, the insurer cannot legally invoke "PED" at all. The textual hook for arguing wrongful PED repudiation flows directly from this statutory definition.

(If your client's wife had completed 60 months of continuous coverage, the moratorium clause in Schedule III, Clause 8 also bars contestation altogether except on "established fraud", a much higher bar than mere non-disclosure.)

4. The Treating Doctor's Certificate

The treating doctor's letter confirming no PED is not a knockout in itself, but in combination with the insurer's failure to produce any pre-policy medical record it shifts the evidentiary balance decisively in your favour:

• Praveen Damani (above) treated the absence of pre-policy medical evidence plus insurer's own pre-issuance examination as together rebutting PED.
• Manmohan Nanda (above) accepted the post-policy diagnosis at the treating hospital as decisive.
• Mahipal Chaudhary (above) gave the "benefit of doubt" to the insured where the insurer had nothing more than a discharge-summary entry to rely on.

5. The Death-and-Hospital-Shift Pattern: A Directly On-Point Authority

The closest fact match is New India Assurance Co. Ltd. v. Smt. Vidya Rani, FA No. 64/2021, Telangana SCDRC, decided 31 March 2026. On facts almost identical to yours, the District Commission's order against the insurer was upheld:

"...refusal to reimburse the total amount the first complainant's husband was forced to shift Government hospital where he died."

"we hold that there is deficiency of service and unfair trade practice on the part of the Respondent/Insurance company in not making the full amount of reimbursement for which the policy as taken as the policy was in [existence]."

New India Assurance Co. Ltd. v. Smt. Vidya Rani, Telangana SCDRC (Open).

The insurer's PED defence (alleged CKD based on an ECHO report) was rejected because nothing in the medical record showed how long the deceased had allegedly been suffering. The award was the balance policy amount with 9% interest from the date of the repudiation letter, plus mental agony and costs. The State Commission confirmed and dismissed the insurer's appeal in toto.

A similar pattern appears in Oriental Insurance Co. Ltd. v. Nirmal Aggarwal, FA No. 449/2017, Haryana SCDRC, decided 5 December 2023, where cashless was denied on a false "sum exhausted" / pre-existing-treatment ground, the insured died during continuing treatment, and the insurer was directed to reimburse the family with 9% interest, mental tension compensation, and costs (Open).

6. What You Can Recover: A Realistic Map

What you cannot get from the consumer forum: damages for the death itself, i.e. tortious "loss of life" damages of the Balram Prasad v. Kunal Saha kind. No reported decision was located where a consumer forum awarded death-equivalent damages against a health insurer for wrongful denial. The consumer remedy is for the deficiency, not for the death. If the family wishes to claim damages tied to the loss of life, that lies in a separate civil suit for tort, which is rare in practice and carries a very different evidentiary burden (proof of causation between the denial and the death, beyond the worsening of condition).

That said, the death and the forced shift to a government hospital are powerful aggravating circumstances that the State Commission / NCDRC will weigh in fixing mental-agony quantum. The recent NCDRC trend, captured in Sushila Singh v. Birla Sun Life Insurance Co. Ltd. (NCDRC, March 2026, where the National Commission used unusually strong language deprecating the insurer's "dubious method" of procuring fake medical evidence to defeat a valid claim), shows the National Commission is willing to call out systematic insurer misconduct, which can translate to enhanced quantum.

7. Forum and Strategy

Pecuniary jurisdiction (Section 34, CPA 2019, after the 2021 enhancement):

• District Commission: up to ₹50 lakh
• State Commission: ₹50 lakh to ₹2 crore
• NCDRC: above ₹2 crore

The relevant value is the aggregate of the claim sought, including compensation prayed for. For a typical health-insurance dispute of this kind, this will usually be the District Commission, with appellate route to the State Commission and NCDRC.

Pre-litigation steps to lock in evidence:

1. Send a statutory notice to the insurer's Grievance Redressal Officer demanding (i) the full repudiation file, (ii) the CRC / PMC minutes approving repudiation under Para 17 of the Master Circular HIB 2024, and (iii) all medical records the insurer relied upon. Failure to produce will itself become an evidentiary point.
2. File a complaint with the IRDAI Bima Bharosa platform (https://bimabharosa.irdai.gov.in/) on the grounds that the cashless decision was not made within one hour as mandated by Para 15 of the Master Circular HIB 2024, and that the repudiation lacked CRC approval and reasoned reference to specific policy clauses.
3. Approach the Insurance Ombudsman if the claim quantum is within the Ombudsman's pecuniary jurisdiction (currently ₹50 lakh per the Insurance Ombudsman Rules, 2017). The Ombudsman is faster and cheaper than the District Commission, and the insurer must comply with the award within 30 days or pay ₹5,000 per day under Para 20 of the Master Circular HIB 2024.
4. Preserve the treating doctor's certificate, the discharge summary from both hospitals, and the death certificate. Obtain affidavits from the treating doctor confirming no clinical or radiological evidence of the alleged "pre-existing condition" predating the policy.
5. The Ombudsman route and the consumer forum route are alternatives, not parallels (the complainant has to elect). For a case with the aggravating circumstances yours has, the Consumer Commission is generally preferable because it allows enhanced compensation for mental agony and litigation costs that the Ombudsman cannot match.

Pleading the cause of action: Plead deficiency of service on three independent and cumulative grounds (substantive, procedural, and consequential) so that the forum can find for the complainant on any one. Specifically:

• Substantive deficiency: PED repudiation without cogent medical evidence, contrary to Mahipal Chaudhary, Mahakali Sujatha, and Manmohan Nanda.
• Procedural deficiency: Breach of Para 15 (1-hour rule), Para 17 (no CRC approval, no reasoned letter referencing a specific policy clause) of the Master Circular HIB 2024, and Regulation 33(d)(iv) of the 2016 Health Insurance Regulations.
• Consequential deficiency: The wrongful denial forced the family into a public-hospital shift causing extreme mental agony and harassment, rendering the policy worthless at the moment of greatest need (Manmohan Nanda ¶69, the "very contract of insurance would become meaningless" rationale; Hari Om Agarwal v. Oriental Insurance, Delhi HC 2007, the "main purpose" rule (Open)).

Demand discovery of: (a) the CRC minutes; (b) the medical opinion (with the doctor's name, qualifications, and contemporaneous records relied upon) on which PED was alleged; (c) the time-stamps of the cashless authorisation request and the rejection (to peg the 1-hour rule breach); and (d) the reconsideration committee's record. In practice insurers struggle to produce these, and that struggle becomes the strongest cross-examination material.

8. One Caveat

The strongest defence the insurer is likely to raise will be a buried entry in either (a) the proposal form (alleged non-disclosure), or (b) some pre-policy medical document the family did not anticipate (a prior consultation note, a prior diagnostic test report, a prior insurance-claim record). Before the consumer complaint is filed, you should obtain a complete medical history of the deceased from her family physician, any GP she had consulted in the 3 years preceding the policy, and any prior insurer she had been covered with. If a discharge summary or hospital admission note for the relevant hospitalisation contains an entry like "k/c/o diabetes for X years" or "h/o hypertension since 200X", anticipate that the insurer will rely on it; Mahipal Chaudhary is your direct answer that this kind of entry, by itself, is not "cogent and reliable evidence".

If your client confirms there is no such record, the case is one of the strongest categories of mediclaim disputes in current Indian consumer jurisprudence.