What Is an Interpleader in a Life Insurance Dispute?
An interpleader is a legal tool used by life insurance companies when multiple people claim to be the rightful beneficiary of the same policy. Instead of deciding who should receive the payout, the insurer asks a court to resolve the issue and deposits the money into the court’s custody until a ruling is made.
Life insurance beneficiary disputes can get messy—fast. When multiple people claim rights to the same payout, the insurer doesn’t want to risk paying the wrong person and getting sued. So rather than take sides, the insurance company may file an interpleader action. This legal move allows the insurer to remain neutral while shifting the conflict to a courtroom. We recently won a $100,000 Genworth interpleader case in August and resolved a $200,000 dispute with North American Life in July. These cases are increasingly common, and understanding how interpleader laws work could be the key to protecting your rights.
What Happens in a Life Insurance Interpleader Action?
When an insurer receives conflicting claims to a life insurance policy, they may first give the parties time to resolve the issue informally. If no resolution is reached within a reasonable period, the insurance company will typically file an interpleader lawsuit. At that point, they deposit the full value of the policy into the court’s escrow account and remove themselves from the legal battle.
The disputing parties are then left to litigate the case in court. A judge will review the claims, evaluate any applicable laws—such as revocation upon divorce, community property rules, or questions of undue influence—and determine who is legally entitled to receive all or part of the payout. Once the ruling is issued, the funds are distributed directly from the court’s escrow account.
Unlike most lawsuits, the insurer isn’t the defendant. Instead, the insurer initiates the action and steps out, leaving the real dispute between the competing claimants.
Why Do Life Insurance Companies File Interpleader Cases?
Insurers use interpleaders to protect themselves from legal liability. If they were to pay one claimant and ignore another who later sues, they could face double jeopardy—being ordered to pay the policy twice. Filing an interpleader:
Transfers liability to the court system
Ensures fair resolution without insurer favoritism
Prevents lawsuits against the insurance company
The insurer is essentially saying: “We don’t know who’s right. You decide, Your Honor.”
Do Interpleader Rules Vary by State?
Yes. Interpleader procedures and timelines can vary depending on your state’s laws and whether the policy is governed by federal law. Most private life insurance policies fall under state law, so interpleader actions are filed in state court. However, employer-sponsored policies are usually governed by ERISA, a federal law, which shifts the case to federal court.
Federal interpleader statutes and court procedures may differ significantly from state-level rules. This is why it’s critical to speak with a life insurance attorney who understands both state and federal interpleader processes. Filing location, procedural deadlines, and court discretion can impact your rights, and waiting too long to respond can cost you the entire payout.
Common Scenarios That Trigger Life Insurance Interpleader Actions
Several circumstances increase the likelihood of an interpleader lawsuit. These include:
Divorce: When state laws conflict over beneficiary revocation or community property rights, surviving spouses and named beneficiaries may both claim a share.
No Named Beneficiary: Policies without a designated beneficiary often lead to disputes among surviving spouses, children, or other relatives.
Suspicious Beneficiary Changes: If changes to the beneficiary were made shortly before death—especially if the insured lacked mental capacity—insurers may file interpleaders to avoid liability in claims involving potential fraud or undue influence.
Multiple Named Beneficiaries With Conflicting Claims: In cases where policies name multiple people ambiguously or where beneficiaries are deceased or unreachable, confusion can prompt an interpleader.
We Handle Complex Life Insurance Interpleader Disputes
Life insurance interpleader cases are not simple beneficiary disputes. They are full-blown lawsuits where claimants must prove their right to the policy proceeds. If you’ve been named in an interpleader case or are expecting one due to a dispute, it’s vital to secure legal representation quickly. The burden of proof will fall on you—and the stakes can be high.
Our firm has a proven track record of resolving interpleader cases successfully. We’ve represented clients in both federal and state courts, recovering substantial payouts even in highly contested disputes. Whether you’re a surviving spouse, ex-spouse, child, or newly named beneficiary, we will aggressively defend your right to the proceeds and help you navigate the legal process efficiently.
Frequently Asked Questions (FAQ)
Q: What is an interpleader in a life insurance case?
A: An interpleader is a lawsuit filed by a life insurance company when more than one person claims the policy benefit. The insurer deposits the money with the court and lets the judge decide who should receive it.
Q: Why would an insurance company file an interpleader?
A: To avoid legal liability. When faced with conflicting beneficiary claims, insurers use interpleaders to stay neutral and let the courts decide who is entitled to the payout.
Q: Do interpleader cases delay life insurance payouts?
A: Yes. These cases can delay payment for several months or more, depending on how long the court takes to resolve the dispute.
Q: What happens to the money during an interpleader action?
A: The life insurance proceeds are placed into a court-controlled escrow account and are not released until a final judgment is made.
Q: Can I still win if I’m not the named beneficiary?
A: Sometimes. In cases involving divorce, community property, or fraud, courts may override beneficiary designations. Legal representation is critical in making your case.