Denied a Critical Illness Insurance Claim Due to Family Medical History? Here's How the Court Ruled | Financial 315

In personal insurance disputes, whether the policyholder has fulfilled the duty of truthful disclosure directly affects the claims outcome. However, for most policyholders without professional insurance knowledge, complex contract terms can be confusing. If an insurance company uses this confusion to deny claims, protecting the rights of the insured becomes increasingly difficult.

Once again, on the occasion of the “3.15” International Consumer Rights Day, the Beijing Financial Court recently held a public hearing at the Financial Street Circuit Court on an appeal case involving a health insurance contract dispute. The court focused on the issue of “the policyholder’s duty of truthful disclosure” and clarified several key questions: Is cancer a hereditary disease that can be inherited from parents? What are the differences between insurance agents and insurance brokers? How is the scope of the policyholder’s duty of truthful disclosure determined?

Before and after the policy, has the “significant hereditary cancer risk” changed?

Let’s look at the case details: In August 2022, Ms. Huang purchased critical illness insurance from an insurance company (hereinafter referred to as “M Insurance Company”) with an insured amount of 500,000 yuan, including a waiver of future premiums upon diagnosis of a critical illness. In January 2025, Ms. Huang was diagnosed with lung adenocarcinoma. Her claim for benefits was denied by M Insurance Company, and she filed a lawsuit in Beijing Chaoyang Court.

The first-instance court ruled that M Insurance Company should pay Ms. Huang 500,000 yuan in insurance benefits, waive her future premiums, refund her 6,454 yuan in premiums, and keep the insurance contract valid. Dissatisfied, M Insurance Company appealed to the Beijing Financial Court.

What was the reason for the insurance company’s denial? M Insurance argued that Ms. Huang deliberately concealed her family history of tumors, including breast and ovarian cancer in her mother and lung cancer in her grandmother. Ms. Huang knew she had a significant hereditary cancer risk but did not disclose it when applying for insurance, which was a subjective act of intentional concealment. Therefore, they did not agree to her full claims.

According to information disclosed by the Beijing Financial Court, four major issues were focused on during the appeal: First, the validity of M Insurance’s questions about “family tumor history”; second, whether the sales personnel were insurance agents or brokers; third, whether the policyholder violated the duty of truthful disclosure; fourth, whether M Insurance’s denial and contract termination had factual and legal basis.

To address these, the Beijing Financial Court clarified several key concepts related to the insurance contract involved.

First, the duty of truthful disclosure means that when establishing an insurance contract, the policyholder has an obligation to truthfully inform the insurer of important facts about the insured or the insured object, enabling the insurer to accurately assess whether to underwrite and at what rate. According to the Insurance Law and relevant interpretations, the scope of the policyholder’s duty of truthful disclosure is limited to matters explicitly inquired about by the insurance company.

Second, M Insurance’s question in the “Personal Insurance Electronic Application Form” was whether “the insured currently suffers from or has ever suffered from hereditary diseases,” not about family tumor history. Additionally, the contract’s definition of hereditary diseases did not include any mention of family tumor history. From both medical and general consumer perspectives, ‘family tumor history’ cannot be considered a ‘hereditary disease’. The Beijing Financial Court held that M Insurance did not make a clear and valid inquiry regarding “family tumor history” in the application form.

Third, Ms. Huang contacted an insurance broker, not an agent of M Insurance. According to the Regulations on Insurance Sales Behavior, insurance brokers are also considered insurance sales personnel. On one hand, the questions asked by insurance brokers are not directly equivalent to those asked by the insurance company; on the other hand, if M Insurance authorized its sales personnel to ask questions, the legal effect of Ms. Huang’s duty of disclosure should also be attributed to M Insurance.

The Beijing Financial Court stated that Ms. Huang truthfully disclosed her family members’ tumor history to the sales personnel, who did not ask further details and did not refuse her to continue with the application. Therefore, based on the evidence, her violation of the duty of truthful disclosure cannot be established. Considering the contractual agreements between both parties, the court ruled on the spot: dismissing the appeal and upholding the original judgment.

Nearly 70% of personal insurance cases involve the duty of truthful disclosure

First Financial journalist found that on the judgment document website, many cases involve disputes over the duty of truthful disclosure in personal insurance contracts, and complaints from policyholders about unreasonable claim denials are common on third-party complaint platforms.

“Statistics show that nearly 70% of personal insurance cases involve clarification and determination of the policyholder’s duty of truthful disclosure, and the outcome can have a transformative impact on insurers and insureds.” said Hao Di, deputy head of the Beijing Financial Court’s filing division and the presiding judge of the case. The deep integration and vigorous promotion of internet technology in the insurance industry are profoundly impacting and changing traditional processes such as underwriting, claims, and policy issuance, making the fulfillment and assessment of the duty of truthful disclosure more complex.

A senior insurance broker told First Financial that while insurance sales seem straightforward, they are actually very complex. Even within the same insurance product category, differences in pricing among companies often stem from subtle contractual details. Coupled with ongoing disagreements in medical and insurance industry assessments, it is not easy for ordinary policyholders to thoroughly research before purchasing and to ensure smooth claims afterward. If sales personnel focus solely on performance without proper explanation or guidance, the likelihood of disputes increases significantly.

Hao Di pointed out that under China’s “questioning and disclosure” model, insurance companies should ask about relevant matters within a reasonable scope, clearly and explicitly. When professional terminology is used, insurers should provide explanations. They should not abuse their questioning rights to arbitrarily expand the scope or use ambiguous language. If the questions are broad, vague, or ambiguous, the principle of interpreting ambiguous terms in favor of the insured should be applied to achieve substantive fairness.

It is understood that the principle of interpreting ambiguous terms in favor of the insured means that when contract clauses are unclear or ambiguous, the interpretation unfavorable to the party providing the standard form (usually the insurance company) should be adopted. The Insurance Law also stipulates that “when a contract clause has more than one interpretation, the court or arbitration body shall interpret it in favor of the insured and beneficiaries.”

She further stated that this case, through circuit court trials and exemplary judgments, guides insurance companies to standardize their practices in underwriting, claims, and other processes, supporting the healthy and sustainable development of the insurance industry. “Specifically, in this case, the insurance company asked about hereditary diseases, not family tumor history. Objectively, based on current medical understanding, it is also difficult to classify family tumor history as a hereditary disease. Moreover, Ms. Huang did not conceal her mother’s illness when applying. The insurance company’s strict demand for consumers to proactively disclose beyond the inquiry clauses is not conducive to protecting consumers’ rights and interests, nor to the sustainable development of the health insurance industry,” Hao Di concluded.

(This article is from First Financial)