Life Insurance Interpleader Lawsuits

Christian Lassen Esq
Quoted in The Wall Street Journal
25 Years Experience Handling Life Insurance Disputes Nationwide

If you have been named as a defendant in a life insurance interpleader lawsuit, you are already involved in active litigation. This is not a routine insurance matter, and it is not an internal claim review. An interpleader is a lawsuit filed in court that places full control of the life insurance proceeds in the hands of a judge.

Once an interpleader action is filed, the insurance company no longer decides who gets paid. The outcome depends on legal filings, evidence, governing law, and how effectively each claimant asserts their position. Missing a deadline or failing to respond properly can result in permanent loss of the proceeds, even if you were the rightful beneficiary.

At Lassen Law Firm, we focus exclusively on life insurance disputes. Christian Lassen personally represents beneficiaries nationwide who have been sued in life insurance interpleader cases, from the moment the lawsuit is served through final resolution.

What a Life Insurance Interpleader Lawsuit Is

A life insurance interpleader lawsuit is filed when an insurance company claims it cannot safely determine who is legally entitled to the policy proceeds. Rather than paying the benefit, the insurer files a lawsuit, deposits the funds with the court, and names all potential claimants as defendants.

After the court accepts the deposited funds, the insurer typically asks to be dismissed from the case and discharged from further liability. If dismissal is granted, the insurance company exits the litigation entirely. The remaining defendants then litigate directly against one another to establish who has the superior legal right to the proceeds.

Although interpleader is presented as neutral, insurers often file these lawsuits even when reasonable claims handling could have resolved the dispute. Interpleader shifts the financial risk, litigation burden, and legal costs to the beneficiaries.

Where Life Insurance Interpleader Lawsuits Are Filed

Many life insurance interpleader lawsuits are filed in federal court. Insurers often prefer federal court because it provides uniform procedural rules, broader jurisdictional reach, and the ability to bring all claimants into a single forum.

Federal interpleader cases may proceed under Federal Rule of Civil Procedure 22 or under the federal interpleader statute at 28 U.S.C. § 1335. These two forms of interpleader have different jurisdictional requirements, service rules, and strategic consequences.

Some interpleader lawsuits are filed in state court, particularly when all parties reside in the same state or when federal jurisdiction is unavailable. Employer provided group life insurance policies are frequently governed by ERISA, which can override state law and impose a separate federal legal framework.

Determining the proper court and identifying the governing law is one of the most important early issues in any interpleader case.

Why Insurance Companies File Interpleader Lawsuits

Insurance companies file interpleader lawsuits to protect themselves from potential double liability. When an insurer believes that paying one claimant could expose it to a lawsuit from another, interpleader allows the insurer to avoid making a decision.

Common situations that trigger interpleader include divorce related beneficiary disputes, multiple beneficiary designation forms, alleged beneficiary changes shortly before death, claims of forgery or undue influence, competing claims between family members and estates, and conflicting employer records under group policies.

In practice, insurers frequently use interpleader defensively, prioritizing their own protection over prompt payment of benefits.

Federal Interpleader Law Explained

Federal Rule 22 allows an insurer to file an interpleader lawsuit when it faces competing claims that could result in multiple liability. Rule 22 does not create federal jurisdiction on its own, so the insurer must independently establish subject matter jurisdiction.

Statutory interpleader under 28 U.S.C. § 1335 provides an independent basis for federal jurisdiction. It requires only minimal diversity between claimants and permits nationwide service of process. Insurers proceeding under statutory interpleader must deposit the policy proceeds with the court.

The choice between Rule 22 and statutory interpleader affects venue, jurisdictional challenges, service of process, and litigation strategy. Understanding these distinctions is critical to defending an interpleader case effectively.

What Happens After an Interpleader Is Filed

After the lawsuit is filed, the insurer serves all named defendants with court papers. Each defendant must respond within strict deadlines set by court rules. Failure to respond can result in default judgment and permanent forfeiture of any claim to the proceeds.

The insurer typically files motions requesting permission to deposit the funds, discharge from liability, dismissal from the case, and reimbursement of attorney fees from the deposited proceeds.

Once the insurer is dismissed, the remaining defendants litigate entitlement to the funds through pleadings, discovery, motion practice, and, if necessary, trial. Courts may encourage settlement, but final resolution depends on evidence and applicable law.

How Courts Decide Who Receives the Proceeds

Courts decide interpleader cases based on documentary evidence, witness testimony, and governing legal principles. The analysis usually begins with the beneficiary designation on record with the insurer.

Courts examine whether the designation complies with policy requirements and applicable statutes. State laws that revoke beneficiary designations after divorce may apply, although exceptions are common and federal law may preempt state statutes entirely.

Courts also evaluate claims of forgery, undue influence, or lack of mental capacity. These allegations require proof and are not presumed to be true. When multiple beneficiary forms exist, courts determine which designation controls based on timing, execution, and compliance with policy requirements.

Typical Timeline of a Life Insurance Interpleader Case

Most interpleader cases follow a predictable sequence. The case begins with filing and service, followed by insurer motions for deposit and dismissal. After dismissal, the case proceeds through discovery, motion practice, and resolution by settlement or court decision.

Some cases resolve quickly when documentation is clear. Others involve extended litigation when intent, credibility, or legal interpretation is disputed.

Your Rights as a Named Beneficiary

As a named defendant in an interpleader lawsuit, you have the right to assert your claim to the proceeds, challenge competing claims, oppose improper attorney fee requests, conduct discovery, and seek summary judgment when appropriate.

Interpleader cases are adversarial litigation. Courts do not protect beneficiaries who fail to act. Those who miss deadlines or fail to present evidence often lose by default.

Representative Interpleader Case Example

In a recent interpleader case, a surviving child was named as a defendant after a former spouse asserted a competing claim. The insurer refused to pay and filed interpleader. By presenting beneficiary records, policy compliance evidence, and governing law, we established our client’s priority and secured full payment of the proceeds.

What To Do If You Are Served With an Interpleader Lawsuit

If you receive interpleader papers, do not ignore them. Preserve all documents, avoid communicating directly with competing claimants, and contact an experienced life insurance attorney immediately.

Early legal strategy often determines the outcome in an interpleader case.

See our Life Insurance Interpleader Lawsuit Fact Sheet

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Written & Reviewed by Christian Lassen, Esq., Nationally recognized life insurance lawyer: 25 years experience, hundreds of millions recovered.  Quoted in The Wall Street Journal ( May 17, 2025).

Last reviewed: Jan 3, 2026 | Contact 800-330-2274