The recent order in the case of Jasmine Ebenezer Arthur v HDFC ERGO General of the Madras High Court has held that a writ petition is maintainable against any private body when it has public duty imposed on it.

The writ petition filed by a lady seeking direction and assistance from a private insurance company to honour the insurance claim in respect of Health Insure Policy availed by her husband.

The claim was rejected by the private insurance company on the ground that the cause of the death of her husband was not covered under the “Major Medical Illness” ambit. When the lady approached Grievance Cell and Insurance Ombudsman, her complaint got repudiated.

The contention placed before the Madras High Court by the insurance company was that it is not a “State” within the meaning of Article 12 of the Constitution of India, 1950. Therefore by merely impleading the Insurance Regulatory and Developmental Authority as a party, the writ petition seeking Mandamus against the company is not maintainable by law.

The Madras High Court rejected this contention of the Insurance Company and stated that, “Today, in the modern world, there are numerous socioeconomic activities to be performed by the State. This resulted in sharing some of the obligations to the other bodies, while retaining certain level of control over them. This gave an impetus to the public and private bodies to acquire major concerns and started exercising monopoly power over its activities, which are close to State functions. By allowing these governmental functions to the private bodies, the fundamental rights of the citizens are being strained.”

The bench also made observations that in Insurance Sectors, public monopoly power has been replaced by private monopoly power which makes it essential that the private bodies should be made accountable to judiciary within the judicial review. It went on to state that, “A reading of Article 226 makes it clear that it can be invoked not only for infringement of fundamental rights, but also for any other purpose. Therefore, as stated above, the question that requires determination is whether the private bodies performing public duties can be brought within the purview of judicial review. If a private body is brought within the purview of Article 12, then it will be subject to constitutional limitations. As happened in this case, lack of effective control has made the private bodies acquire more power similar to public authorities. The public monopoly power is replaced by private monopoly power. Hence, it becomes necessary that the private bodies should be made accountable to judiciary within the judicial review. If any private body has a public duty imposed on it, the Court has jurisdiction to entertain the writ petition.”

Emphasis was placed on the malpractice by insurance companies and how it must be restrained. The court said, “Even though law seems to be clear in constituting a balance between the insuring party and insured, in reality, there is no equality between the two as insurer is the richest corporation and the individual is an ordinary individual. In fact, in many cases, the individual has no legal knowledge about the ambiguous language used in the company’s policy with an intention to waive them from the liability to pay the injured on happening of an agreed event. Many a times the companies willfully neglect reimbursing the insured, who instead of getting their amount from the company have to pay the Courts for getting their rights enforced.”

The writ petition was thus allowed and the Madras High Court stated that, “Most of the people give high priority to security of their investments, though the present scenario in the insurance sector offer many high return, but risk involved policies. Therefore, the insurance companies should focus on educating their customers about their financial backing. Such propagation and education should not only be in the form of issuing pamphlets, booklets, etc. to the customers, but also providing them with audio and visual forms, such as informative slides, conversational videos educating about the Frequently Asked Questions (FAQs), etc., which could be given either via CDs or e-mails, in bilingual. The reason being even the educated professionals of the large portion of the population is unaware of various insurance plans and the risk involved in them. The insurance companies cannot wash their hands by merely contending that every minute information has been given in the offer documents and the insured accepted those conditions by affixing their signature in the documents, as those information were never noticed by the insured. The companies should concentrate on factors like right mix of flexibility, risk and return, which will suit the customer.”

Judgment Link-Jasmine Ebenezar Arthur v HDFC ERGO General

Image Link-