Life Insurance Claim Rejected Under 'Open Title'? Here’s What It Means And How You Can Avoid It

Can a missing signature lead to claim rejection for a life insurance policy? Duggabati Raghava Rao never thought a missing detail like this could push him into a complex situation. After the unfortunate demise of his brother, Duggabati Venkata Krishna Rao, Raghava found himself in a tight situation while claiming funds for a term plan purchased by his brother. The reason? The claim fell under the despite of an ‘open title’.

What is the issue of ‘Open Title’ and how can it lead you to a claim rejection? Let’s understand with the help of this story.

Missing Signature and Claim Rejection

In an informative case story shared by Beshak.org, an online InsurTech platform, we find the story of Venkata who purchased two life insurance policies in his lifetime - one with a sum assured of Rs 1 lakh and another for Rs 5 lakh. To provide financial assistance to his brother, Venkata had given updated nominee information which made Raghava a beneficiary of both the policies.

But when Raghava moved to file the claim, the insurer rejected his claim, citing a critical issue in the policy document - a missing signature on the nomination change letter that Venkata had submitted years ago. 

Although the insurer had accepted the nomination change during intimation, they now were asserting the document as 'incomplete' - which rendered the claim legally ambiguous.

They claimed that as there was no signature, the claim came under 'Open Title.' This is not a common phrase used ordinarily while declining a life insurance claim, but there is a possibility that your insurer may use this word while challenging the validity of the policy or the claim.

As a correction, Raghava was asked to provide a succession certificate which is a legal document that establishes the rightful heir to the deceased’s assets. Without this certificate, the insurer told Raghava that they couldn’t determine who should rightfully receive the payout.

The Legal Recourse

The insurer called the claim ‘invalid’ even though they had already accepted the nomination change five years before the unfortunate demise of Venkata. 

As a recourse, Raghava took the case to the District Forum which was met with disappointment. The forum had ruled in favour of the insurer, stating that the nomination was invalid due to the missing signature.

Refusing to back down, Raghava then approached the National Commission pointing out that the insurer had already acknowledged the nomination change, and their sudden reversal was unjust.

The Commission then carefully reviewed the case and found lapses in the insurer’s actions. The insurer, they noted, should have never accepted the incomplete nomination change in the first place. Moreover, if they noticed the missing signature, they should have alerted Venkata while he was still alive.

This failure on the part of the insurer had put the nominee at an unfair disadvantage.

What did the verdict say?

The National Commission ordered the insurer to pay the claim while also imposing a legal cost of Rs 5,000 on them, including a 9 per cent annual penalty if the amount was not paid within four weeks.

Raghava’s ordeal serves as a cautionary tale for other life insurance policyholders and nominees. Here’s what you can do to avoid such a rejection:

Double Check Documents: You should check all policy-related paperwork, making sure that all are correctly filled out and acknowledged by the insurer. Even a single missing detail, like a signature, can lead to disputes at the time of claim.

Maintain Copy of Records: It is equally as important for policyholders to maintain a copy of the documents/records particularly if you’ve updated them over the policy tenure. For instance, if you update your nominee details, make sure to keep records of all submitted forms, acknowledgement receipts, and written confirmations by the insurer.

Know the Legal Protections: Married men can use the Married Women’s Property (MWP) Act to ensure that their insurance proceeds go directly to their wives and children, preventing disputes.

Know Your Rights: If your claim has been unfairly rejected, you can take the matter to grievance redressal authorities to get justice. Sometimes, standing your ground can make a lot of difference in cases like Raghava.

Life insurance is a financial tool that provides security to your family and dependants - any legal battle could add onto the troubles of the grieving families. However, by staying vigilant you can make sure that your family receives the protection you intended when they need it the most.