Insurance Claim Denied After Initial Approval – Legal Remedies Available

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by

Adv Sudhir Rao
in

One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Insurance Claim Denied After Initial Approval - Legal Remedies Available

Mr.X had been paying premiums regularly for his health insurance policy with XYZ Insurance Company for over five years. When he required hospitalization for a medical emergency in DD/MM/YYYY, he filed a claim for Rs. 2,50,000. The insurance company initially approved his claim and issued a cashless authorization to the hospital in City A. However, three months later, they suddenly reversed their decision and denied the claim, citing alleged non-disclosure of pre-existing conditions. Mr.X was shocked as he had disclosed all medical history during policy purchase and renewals. The company also transferred him from an individual plan to a group plan two years earlier, which complicated matters. He approached our firm seeking legal recourse against this unfair denial and bad faith practices by the insurer.

Advice in Such Cases

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

  • File complaint with Insurance Regulatory and Development Authority (IRDAI) within prescribed time limits
  • Approach Insurance Ombudsman for resolution before considering court action
  • Document all communications and maintain chronological records of the claim process
  • Gather medical records and expert opinions to counter insurer’s denial reasons

Applicable Sections of Law

  • Section 318 of BNS (Bharatiya Nyaya Sanhita) – Cheating and dishonestly inducing delivery of property
  • Section 319 of BNS – Punishment for cheating by personation or fraudulent means
  • Section 351 of BNS – Criminal breach of trust by public servants or agents
  • Section 223 of BNSS (Bharatiya Nagarik Suraksha Sanhita) – Procedure for filing complaints against corporate entities

Insurance companies acting in bad faith and denying legitimate claims can face criminal prosecution under these provisions along with civil remedies.

If You Are the Complainant

  • File FIR under relevant sections of BNS at local police station
  • Submit detailed complaint to IRDAI with supporting documents and evidence
  • Approach Insurance Ombudsman within one year of claim rejection
  • File civil suit for damages including mental harassment and litigation costs
  • Consider consumer court proceedings under Consumer Protection Act simultaneously
Insurance Claim Denied After Initial Approval - Legal Remedies Available

If You Are the Victim

  • Immediately seek medical attention if health is compromised due to claim denial
  • Preserve all policy documents, claim forms, and communication records safely
  • Get written confirmation of initial approval and subsequent denial reasons
  • Obtain independent medical opinions to counter insurer’s medical assessments
  • Calculate total financial losses including interest, penalties, and consequential damages

How the Police Behave in Such Cases

Police often treat insurance disputes as civil matters initially. However, when fraud, cheating, or criminal breach of trust is involved, they register FIR under BNS provisions. Insurance companies have legal departments that may pressure police to avoid investigation. Persistence and proper legal representation are essential for proper police action. Officers may require education about criminal aspects of insurance fraud and bad faith denials.

FAQs People Normally Have

Can I file criminal case against insurance company? Yes, if there’s cheating, fraud, or criminal breach of trust involved in claim denial.

What’s the time limit for complaints? IRDAI complaints within 1 year, Ombudsman within 1 year, criminal complaints have 3-year limitation generally.

Will I get compensation for mental harassment? Yes, courts award compensation for mental agony and harassment in insurance disputes.

Can insurance company deny pre-approved claims? No, once cashless authorization is issued, claim cannot be arbitrarily denied without valid grounds.

Insurance Claim Denied After Initial Approval - Legal Remedies Available

What Evidence Is Required?

  • Original insurance policy document and premium payment receipts
  • Hospital discharge summary, medical reports, and treatment bills
  • Cashless authorization letter and initial claim approval communication
  • Claim denial letter with specific reasons mentioned
  • All email and written correspondence with insurance company
  • Medical expert opinions countering insurer’s denial grounds
  • Financial loss statements and consequential damage calculations

How Long Will the Investigation Take?

IRDAI complaints typically take 3-6 months for resolution. Ombudsman proceedings usually conclude within 2-3 months. Criminal investigation may take 6 months to 2 years depending on case complexity. Civil court proceedings can extend 2-5 years. Consumer court cases generally resolve faster, within 1-2 years. Timeline depends on evidence quality and legal representation effectiveness.

Advocate Sudhir Rao, Supreme Court of India

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