Merely Because Treatment Did Not Require Hospitalisation, Health Insurance Claim Cannot Be Rejected: Karnataka HC

The Karnataka High Court has dismissed a writ petition filed by National Insurance Co. Ltd challenging a Permanent Lok Adalat award directing the insurer to reimburse a retired Bank of Baroda officer for two cancer-related injections, holding that denying the claim merely because the treatment did not require hospitalisation would produce an "anomalous result" and defeat the purpose of health cover.

Justice Suraj Govindaraj also imposed a cost of Rs 50,000 on the insurer, payable to the retired officer, Padmanabha Shetty G, besides directing payment of the amount already awarded by the Permanent Lok Adalat, with interest.

Shetty, a retired officer of Vijaya Bank, later merged with Bank of Baroda, was covered under a health insurance scheme framed by the Indian Banks' Association for retired employees of member banks, with annual coverage of Rs 9,00,000 for the period November 2021 to October 2022. He was suffering from Stage IV carcinoma of the prostate and underwent chemotherapy at HCG Hospital, Bengaluru, after which doctors advised two injections, Zoladex and Xgeva, once every three months.

While the insurer reimbursed several components of his treatment, including four separate hospitalisations, it refused to pay for the two injections, taking the position that they amounted to out-patient treatment falling outside the policy's coverage.

Unable to recover the claimed sum of Rs 2,85,470, Shetty approached the Permanent Lok Adalat, Mangaluru, under Section 22-C of the Legal Services Authorities Act, 1987. The Adalat ruled in his favour on September 20, 2023, directing payment of the amount with 6% annual interest and Rs 25,000 as compensation, later modifying its order on Bank of Baroda's application to clarify that the liability rested with the insurer, not the bank.

Before the High Court, the insurer's counsel, Devaiah I.S., argued that the Permanent Lok Adalat had skipped mandatory conciliation under Section 22-C and ought to have attempted settlement before adjudication, seeking a remand. On merits, he relied on the policy's definitions of "Day Care Treatment" and "Hospitalisation" to contend that since the injections required neither anaesthesia nor admission for 24 hours, they could not be treated as covered expenses.

The Court, however, asked the insurer during the hearing whether it was willing to make any settlement offer given the passage of time, and was told categorically that it was not, since it maintained it owed nothing at all. The order noted that "conciliation cannot be converted into a process whereby one party is required to persuade the other to abandon or withdraw a claim which it asserts to be legally sustainable," and that sending the matter back would be "incongruous" once the insurer had ruled out any settlement.

On the coverage dispute, counsel for Shetty, Ranjan Shetty, submitted that Zoladex, used to suppress testosterone in hormonal therapy, and Xgeva, used to prevent skeletal complications, were prescribed as a continuation of his cancer treatment and could not be treated as unrelated to his insured illness merely because they did not require hospitalisation.

Agreeing with this, the Court observed that "hospitalisation is not an end in itself; it is a mode in which medical treatment may be administered," and that treating its absence as decisive would make "the availability of insurance dependent upon the manner of administration of the treatment rather than its therapeutic purpose." It held that the Adalat's award did not suffer from any legal infirmity warranting interference.

Counsel Kashyap N. Naik appeared for Medi Assist Insurance TPA, submitting that liability rested with the insurer since it had taken over the scheme, while Vignesh Shetty, for Bank of Baroda, argued that neither the bank nor Vijaya Bank could be held responsible, as the insurance contract existed strictly between the insurer and Shetty.

With the writ petition dismissed, the insurer has 30 days from receipt of the order to clear both the High Court's cost and the sum directed by the Adalat, with accrued interest.

Case Title: M/S National Insurance Co Ltd and Anr. v. Mr Padmanabha Shetty G and Others

Date of Order: September 1, 2026

Bench: Justice Suraj Govindaraj