Life insurance interpleaders are the legal actions filed when there is a dispute over who should be the beneficiary and receive the death benefit. 

Have you been served with an interpleader complaint? If not, do you think you should be a life insurance beneficiary, but the policyholder did not name you? Were or are you married to the policyholder? Was the policy group life insurance from the policyholder’s employer? Did the beneficiary designation change just before the policyholder’s death?

In any of these cases, you may be a party to a beneficiary dispute and you may be entitled to a payout. Call the experienced life insurance lawyers at Boonswang law for help investigating your claim, navigating the complex web of state and federal law that applies, and preparing your case. We have worked with clients across the nation and helped them get their death benefits, and we do not get paid unless and until you do. Call now to discuss your case, free of charge.

Interpleader Definition

What is an interpleader action? An interpleader is the way a holder of property that is the subject of ownership dispute initiates a lawsuit to settle that dispute.

In life insurance, an interpleader is initiated by the life insurance company when someone disputes the beneficiary designation. The life insurance beneficiary dispute is settled in that lawsuit, and the life insurance company pays the death benefit to the prevailing party.

Common Times When an Interpleader Actions Happen

Divorce

If the policyholder was divorced, both their spouse and ex-spouse may have a claim to some or all of the death benefit even if they are not the named beneficiary on the policy.

Is This a Revocation-Upon-Divorce State?

If so, and the former spouse of the policyholder was named as the beneficiary to the policyholder’s life insurance policy, they were automatically removed from the policy under the state’s life insurance revocation-upon-divorce statute. However, they may have a valid claim to the death benefits under the following four scenarios.

Was the Life Insurance Policy a Benefit of Employment?

If group life insurance coverage was a benefit of the policyholder’s employment, then federal ERISA law applies. ERISA overrides a state’s revocation upon divorce statute, so if an ex-spouse remains the named beneficiary upon the policyholder’s death, they have a claim to the death benefit.

Is This Life Insurance Dispute in a Community Property State?

When a life insurance policy is governed by the laws of one of the nine community property states, such as California and Texas, if the policyholder paid life insurance premiums with community property (money earned during the marriage) that spouse or ex-spouse may have a valid claim to some of the death benefit. 

In any state, if life insurance is considered a marital asset, the spouse or ex-spouse almost always has a valid claim.

Was There an Irrevocable Beneficiary?

An irrevocable beneficiary designation in life insurance cannot change without the knowledge and consent of that beneficiary. If the beneficiary designation changes without that knowledge or consent, the former beneficiary has a claim to the death benefit.

Was There Court Ordered Life Insurance Coverage?

In many cases where the policyholder is a support obligor, a family law judge will often order that they maintain life insurance coverage to insure the income stream for the support obligees. If that policyholder names other parties as beneficiaries, the support obligees may have a claim to some or all of the death benefits.

A Policy Names No Beneficiary

If the beneficiary designation is invalid, as when an ex-spouse is named as the life insurance beneficiary in a revocation-upon-divorce state, other potential beneficiaries may step forward to claim the death benefits. If there is no other beneficiary named or anyone with a valid claim, the death benefits may pay out to the policyholder’s estate and go through probate.

If the primary beneficiary of a life insurance policy died before the policyholder, and the policyholder failed to name secondary or contingent beneficiaries, the death benefits may pay to the policyholder’s estate.

Potentially Fraudulent Beneficiary Changes

If a life insurance beneficiary was changed at the last minute, it may have been done fraudulently, under duress, or when the policyholder did not have the mental capacity to make that change. In that case, the formerly-named beneficiary may have grounds for a beneficiary dispute.

Interpleader Laws Vary By State

If a life insurance beneficiary dispute interpleader is filed in state court, that state’s laws govern the matter. The outcome of the interpleader may very well depend upon whether that state has a certain type of law or not.

States vary as to whether they have a revocation-upon-divorce statute, in their legal definition of fraud, and in how property is divided upon divorce. If you are involved in a life insurance interpleader filed in state court, be sure to retain a life insurance attorney with experience practicing under the law in your state.

The Federal Courts May Have Jurisdiction Over a Life Insurance Interpleaders

Federal Rules of Civil Procedure (FRCP) Rule 22 allows an interpleader action to be filed in federal court if the court has subject matter jurisdiction over the case.

What is “subject matter jurisdiction?” A federal court has subject matter jurisdiction over a case when it involves a federal question, meaning, federal law governs the case. The federal court may also have “diversity jurisdiction” if the parties involved are citizens of different states or countries, or if the amount in controversy exceeds $75,000. 

If the life insurance policy in dispute was issued through the policyholder’s employer, it is governed by federal ERISA law and a beneficiary dispute interpleader may be filed in federal court. Some life insurance policies issued to federal government workers may also be under the federal court’s jurisdiction.

Attorney’s Fees and Costs in a Life Insurance Interpleader

In many cases the court will grant the life insurance company attorney’s fees and court costs in an interpleader, which will be taken from the death benefit in dispute. These fees and costs can be significant in complex cases. An experienced life insurance lawyer helps negotiate and streamline the process to minimize that loss.

Making a Competing Claim in an Interpleader Action

If you’ve been served with a complaint for interpleader by the life insurance company, this means that the life insurance company believes you may have a claim to the death benefits in dispute. You must file an answer within the time allotted, which is 21 days if the complaint is filed in federal court. If filed in state court, that state’s laws will govern.

How a Life Insurance Lawyer Helps

Often many thousands or hundreds of thousands of dollars, even millions, are at stake in a life insurance interpleader. If you are a party to a life insurance beneficiary dispute or believe you should be a life insurance beneficiary but were not named, you may be entitled to a life-changing amount of money.
Don’t risk losing that money due to inexperience or missing important court deadlines. Our experienced life insurance lawyers have worked with clients across the nation and have gotten our clients what they deserve. Call us today to discuss your case, free of charge.