An interpleader lawsuit is filed by a life insurance company when multiple people claim to be the rightful beneficiary of a policy. It allows the court—not the insurer—to determine who should receive the payout. While receiving a lawsuit can feel alarming, being named in an interpleader action doesn’t mean you’ve done anything wrong. It simply means the insurer is unsure who to pay and wants legal protection from making the wrong decision.
At our law firm, we represent individuals who have had life insurance claims denied or delayed for any number of reasons. One of the most common—and most misunderstood—situations we encounter is when someone is served with a lawsuit from the life insurance company shortly after a loved one’s death. Often, these individuals are in complete shock. They were expecting a benefit, not a summons. When we get the call, we often already know what’s happening before reading a single word of the complaint. Most of the time, it’s a classic life insurance interpleader case.
What Is a Life Insurance Interpleader?
An interpleader action is a legal tool used by insurance companies when more than one party makes a claim to the same life insurance benefit. Rather than risk paying the wrong party—and potentially having to pay again—the insurer essentially steps out of the dispute and asks a court to decide who should receive the funds. Once the interpleader is filed, the insurance company deposits the policy proceeds with the court and exits the litigation. From that point forward, it’s up to the competing parties, usually family members or ex-spouses, to argue their case in court.
This might sound like a neutral and efficient solution, but it can be extremely stressful for those involved. Beneficiaries are often unprepared for legal proceedings and may mistakenly believe they’re being sued. It’s critical to understand that being named in an interpleader case doesn’t mean you’ve done anything wrong—it means the insurance company wants clarity and legal protection before issuing payment.
A Common Interpleader Scenario: Divorce and Remarriage
To better understand how these cases arise, let’s look at a typical example. Consider a man named John, who divorced his first wife, Adriana, after thirteen years of marriage. They had two young children. As part of the divorce decree, John was required to maintain a $400,000 life insurance policy naming Adriana as the beneficiary—intended to protect the children’s financial future in case he passed away before they reached adulthood.
A year after the divorce, John remarried. His new wife, Sally, disliked his ex and convinced him to change the beneficiary designation to her name. Wanting to avoid conflict at home, John made the change without informing Adriana or seeking court approval. Tragically, John was killed in a car accident just a few years later.
When both Adriana and Sally submitted claims on the same policy, the insurer refused to decide between them. Instead, it filed an interpleader lawsuit, named both women as defendants, and handed the matter over to the courts. Both were blindsided and confused—but neither had done anything legally wrong. They were now participants in a legal battle over who should rightfully receive the benefit.
Who Wins an Interpleader Case?
The court determines the rightful beneficiary based on the facts, the applicable policy documents, and state laws—including those that govern divorce, beneficiary changes, and contract enforcement. Many states have specific statutes that revoke a former spouse’s beneficiary designation upon divorce, unless the insured reaffirms it in writing. However, those rules can be overridden by court orders, divorce decrees, or if the beneficiary change was improperly executed.
Key factors the court may consider include:
Whether the insured submitted a valid Change of Beneficiary form
Whether the beneficiary change violated a court-ordered obligation
If any fraud or forgery occurred
Whether the original designation was irrevocable
If the policy was governed by ERISA, federal laws may preempt state statutes
Each of these details can drastically affect the outcome. That’s why legal representation is essential for anyone named in an interpleader action. An experienced attorney can uncover procedural flaws in the beneficiary change, challenge the enforceability of certain designations, and present evidence of intent that may not be immediately obvious from policy paperwork.
What to Do if You’re Served With an Interpleader Lawsuit
If you’ve just been served with a life insurance interpleader complaint, don’t panic—but don’t ignore it either. Courts have strict deadlines for responding, and failure to act could result in forfeiting your right to claim the funds. The first step is to gather every document related to the policy:
A copy of the life insurance policy
All beneficiary designation forms, including any recent changes
The death certificate
Divorce decrees or court orders related to the insured
Any letters or emails from the insurance company or competing claimants
Any written communication that reflects the insured’s intent regarding beneficiaries
Once you’ve assembled these materials, consult a life insurance attorney immediately. The insurance company will already have a legal team handling the interpleader. Even though those lawyers aren’t working against you specifically, they also won’t help you navigate the process. You’ll need your own advocate to protect your rights and argue for your entitlement to the proceeds.
Can the Insurance Company Be Held Responsible?
In most interpleader cases, the insurer avoids liability by turning over the policy funds to the court. But there are exceptions. If the insurance company caused the confusion—by failing to follow its own procedures, processing an invalid change of beneficiary form, or neglecting to enforce a court order—it may still be subject to legal claims such as bad faith or breach of contract.
That’s why reviewing the insurer’s actions is also part of what we do. If we find that the interpleader was filed unnecessarily or in bad faith, we may be able to pursue a separate legal action on your behalf—even if the court rules in favor of another party regarding the payout.
Legal Guidance Is Essential in Interpleader Cases
Life insurance interpleader lawsuits can feel overwhelming, especially during an already emotional time. You’ve lost a loved one—and now you’re being dragged into court to fight for benefits they clearly intended you to receive. The good news is that many of these cases are resolvable with skilled legal representation, and our firm is ready to help.
We specialize in representing individuals caught in life insurance disputes, including those involving interpleader actions, denied claims, ERISA-governed policies, and post-divorce beneficiary challenges. We’ll guide you through the court process, help you gather the strongest evidence, and build a legal strategy aimed at securing the benefit your loved one meant for you to have.