Interpleader Actions

After a loved one passes away, there may be a dispute about who is the proper life insurance beneficiary. These disputes frequently involve family members, former spouses, and other persons with a relationship to the insured.

These can be hotly-contested cases that bring up strong emotions. We have experience representing persons in these cases both as named and unnamed beneficiaries.

Often these cases end up in court when the insurance company files what is called an interpleader action.

In an interpleader action, the insurance company deposits the death benefit in court and then ultimately gets dismissed from the case so that those claiming beneficiary status can litigate against one another. Insurance companies are often quick to file interpleaders when there is an indication that they face competing claims for the death benefit. They seek to avoid a situation where they pay the funds to one person and then later are sued by another claimant—resulting in the possibility that they will have to pay the same policy twice. By filing an interpleader action, the life insurance company is able to name all potential claimants as defendants and exit the case, ensuring that it only has to pay a single death benefit.

Since interpleader actions are frequently filed in federal court, it is important to have a lawyer who is accustomed to its practices and procedures. We have litigated scores of these cases in federal court.

A statutory basis for a life insurance company to file an interpleader action is under 28 U.S.C. § 1335, which requires that (1) two or more persons are claiming the death benefit and reside in different states, and (2) the insurance company has deposited the death benefit into the court registry. This is referred to as “Statutory Interpleader.”

Another basis for a life insurance company to file an interpleader action in federal court is under Federal Rule of Civil Procedure 22, referred to as “Rule Interpleader.” Under Rule 22, a life insurance company generally may file an interpleader action if the death benefit is greater than $75,000, it faces multiple claims for the death benefit, and the life insurance company is based in a different state than where the claimants reside.

If the requirements for either “Statutory Interpleader” or “Rule Interpleader” are not present, the life insurance company must file the case in state court.

A commonality between Statutory Interpleader and Rule Interpleader is that the life insurance company must face the threat of multiple liability from two or more claimants seeking the death benefit. That is, the life insurance company must be presented with a real risk that if it chooses to pay the death benefit to one claimant, it could later end up being liable to pay it to the other claimant. In that case, the life insurance company is allowed to commence an interpleader action and deposit the life insurance proceeds with the court.

Most commonly, the life insurance company will then be dismissed from the action so that the claimants can litigate. However, there are situations where the life insurance company has breached its contract or acted negligently in which case it can remain as a party to the lawsuit.

If you are involved with a New York or New Jersey Interpleader Action, you can call the Law Offices of Eric Dinnocenzo at (212)933-1675 for a free consultation.