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 in active litigation and your financial rights are immediately at risk. An interpleader lawsuit is not a claim review and it is not an internal insurance process. It is a formal court action that places the decision over life insurance proceeds entirely in the hands of a judge.

Insurance companies use interpleader lawsuits to avoid making payment decisions when disputes arise. Instead of determining who should receive the policy proceeds, the insurer deposits the money with the court and leaves the beneficiaries to litigate against one another. The outcome depends on evidence, governing law, procedural posture, and how effectively the case is handled from the outset.

At Lassen Law Firm, we focus exclusively on life insurance disputes. Christian Lassen personally represents beneficiaries nationwide in life insurance interpleader lawsuits, from initial response through resolution.

What a Life Insurance Interpleader Lawsuit Is

A life insurance interpleader lawsuit is filed when an insurance company claims it cannot determine who is legally entitled to policy proceeds. Rather than paying the claim, the insurer initiates a lawsuit, deposits the policy proceeds with the court, and names all individuals or entities who might claim an interest as defendants.

After the funds are deposited, the insurer typically seeks to be dismissed from the case. Once dismissed, the insurer no longer participates in the litigation. The remaining defendants then litigate directly against each other to establish who has the superior legal right to the money.

Interpleader lawsuits are frequently filed even when the dispute could have been resolved through careful claims handling. The filing of interpleader shifts the burden, cost, and risk of litigation away from the insurer and onto the beneficiaries.

Where Life Insurance Interpleader Lawsuits Are Filed

Life insurance interpleader lawsuits are commonly filed in federal court. Insurance companies often prefer federal court because it provides uniform procedural rules, broader jurisdictional reach, and the ability to bring all claimants into one forum.

Federal interpleader cases may be filed under Federal Rule of Civil Procedure 22 or under the federal interpleader statute at 28 USC 1335. Each pathway has different jurisdictional requirements, including diversity standards and deposit rules.

Some interpleader cases are filed in state court, particularly when all parties reside in the same state or when the policy is governed solely by state law. Employer sponsored group life insurance policies are frequently governed by ERISA, which can override state law entirely and impose a different legal framework.

Identifying the correct forum and governing law is one of the most important early issues in an interpleader case.

Why Insurance Companies File Interpleader Lawsuits

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

Common triggers include divorce related disputes, multiple beneficiary designation forms, alleged beneficiary changes near the end of life, claims of forgery or undue influence, competing claims between individuals and estates, and conflicting employer records under group policies.

In practice, insurers often file interpleader even when the rightful beneficiary could be determined through reasonable investigation. Interpleader becomes a defensive tool that prioritizes the insurer’s protection over timely payment.

Federal Interpleader Law Explained

Federal Rule 22 allows an insurer to file an interpleader lawsuit when it faces competing claims that could expose it to multiple liability. Rule 22 does not create jurisdiction by itself, so the insurer must independently establish federal jurisdiction.

Statutory interpleader under 28 USC 1335 provides a separate basis for jurisdiction. It requires only minimal diversity between claimants and allows nationwide service of process. Insurers using statutory interpleader must deposit the policy proceeds with the court.

The choice between Rule 22 and statutory interpleader affects venue, service requirements, jurisdictional challenges, and procedural strategy. Understanding these differences 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. Each defendant must respond within strict court imposed deadlines. Failure to respond can result in default judgment and permanent loss of any claim to the proceeds.

The insurer usually files motions seeking 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, dispositive motions, and if necessary trial. Courts may encourage settlement, but resolution depends on the strength of the evidence.

How Courts Decide Who Receives the Proceeds

Courts decide interpleader cases based on documentary evidence, witness testimony, and governing law. The starting point is the beneficiary designation contained in the policy records. Courts examine whether the designation complies with policy requirements and applicable statutes.

State revocation on divorce laws may automatically revoke former spouses as beneficiaries, but exceptions are common and federal law may override state statutes. In ERISA governed cases, federal law often preempts state law entirely.

Courts also evaluate claims of forgery, undue influence, or lack of capacity. These allegations require specific proof and are not accepted at face value. In cases involving multiple beneficiary forms, courts determine which form controls based on timing, execution, and compliance.

Typical Timeline of a Life Insurance Interpleader Case

Most interpleader cases follow a recognizable timeline. 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 judgment.

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

Your Rights as a Named Beneficiary

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

Interpleader cases are adversarial litigation. Courts do not independently advocate for any party. Beneficiaries who fail to assert their rights aggressively often lose by default or attrition.

Representative 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 applicable law, we established our client’s priority and secured the full proceeds.

What To Do If You Are Served

If you receive interpleader papers, do not ignore them. Contact an experienced life insurance attorney immediately, preserve all documents, avoid direct communication with competing claimants, and act quickly. Early legal strategy often determines the outcome.

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