Interpleader Lawsuit and the Life Insurance Claim

We have handled thousands upon thousands of life insurance interpleader lawsuits, and most likely more than any other firm.

The Interpleader

Individuals buy life insurance for a variety of reasons. The major one is because they want to protect their loved ones financially. Many people pay into their life insurance policy for several years. When doing so they have the peace of mind knowing that their loved ones will be taken care of in the event of the death of the insured. Sometimes this is a false sense of security. There can be disputes that arise over the payout of the life insurance claim.

What is an Interpleader?

When an insured passes away the beneficiaries of the insurance policy make a claim with the applicable insurance company. Once the insurance company has done their review of the claim they then make the payment to the beneficiaries. There are times when the insurance company may receive more than one claim on the insurance policy. The insurance company does not know to whom the claim is to be paid. What they will do is place the value of the policy in the hands of the courts. Then the courts will decide who is to receive the money. The insurance company no longer has any involvement in the payout of the claim. This is the most effective way for the insurance company to deal with this problem. Otherwise they would be spending a great deal of money on trying to settle the claim themselves.

The Life Insurance Interpleader Process

As soon as the insurance company becomes aware of a dispute over the claim, they will start interpleader actions in the court. Legal actions cost money. The insurance company will ask the courts to compensate them for their legal costs out of the proceeds of the life insurance policy in question. Those involved in the dispute now have to make their claims of being the true recipient of the life insurance proceeds to the courts.

Why Would There Be More Than One Claim?

Those who buy life insurance believe the process of leaving the money to their loved ones is a simple process. It is just a matter of naming them as the beneficiary on the policy. This is the proper procedure. The problem arises when someone contests who the beneficiary is.

The amount of money paid out on life insurance claims is substantial. The insurance companies have to be absolutely sure that they are paying the right beneficiary. If there is any doubt on the insurance company's part they would prefer to let the courts determine who is the right payee.

Common Interpleader Cases

Court Orders for Life Insurance

Sometimes individuals are compelled to buy life insurance. This often happens in divorce cases. The courts order a spouse to buy life insurance to protect their children. This is common when the spouse is responsible for paying support. The life insurance protects the children financially if the paying spouse dies. In some cases the insured may have had to cover children from different marriages. This means that the life insurance policy was meant for all the children. The children each put claims in against the life insurance policy. Now the insurance company has received more than one claim. They now have to go into the interpleader process.

Questionable Beneficiaries

The cause of death can sometimes be an issue. The insured may have been murdered. There could be suspicion that the beneficiary had a part in this. In this case the insurance company will opt for an interpleader.

Forgetting to Change the Beneficiary

Married couples will often take out an insurance policy to protect their spouse financially. These policies can be in place for many years. There are times where the couple end up divorcing and then getting remarried. On occasion an insured may forget to change their beneficiary who was their first spouse. Then the insured dies. There is now a problem between the first spouse and the second. Although in some states there are laws in place for this. Where upon divorce there is an automatic revocation.

Not Naming a Beneficiary

Some real battles can surface in the family of the deceased when the insured did not name a beneficiary. The insurance company will have to refer this to the life insurance interpleader.

Individuals who are involved in a life insurance interpleader case should seek out legal advice as this is matter that will be before the courts.

Life Insurance Lawyer and Interpleader

A life insurance attorney can step in and get the interpleader resolved quickly.

Interpleader Action

Whenever someone passes away and there are multiple, conflicting claims on a life insurance policy, the insurance company will usually file a life insurance interpleader. This is a lawsuit filed in the appropriate court that essentially asks the court to determine who is the rightful beneficiary of the policy. The company will deposit the full amount of the policy into a court-controlled bank account and withdraw from the suit until the claims are resolved. The claimants will then have to allow the court to determine who will receive the proceeds of the policy. In many cases, this is done through arbitration, but it can go to a formal court hearing.

How Is a Life Insurance Interpleader Resolved?

Any time there are two or more individuals filing a claim for the proceeds of an insurance policy, the company will most likely file an interpleader. It is often the best way to resolve the dispute and ensures that there is no bias in the determination between the claimants. If you’ve filed for the proceeds of a life insurance policy and been told that another individual or individuals have filed for the proceeds, expect them to file an interpleader.

When the insurance provider files this, it will also request that the court deducts its legal fees from the life insurance proceeds, which will leave less money for the successful claimant at the end of the law suit or arbitration. Having an attorney on your side as soon as you learn there is a conflicting claim or even before the interpleader is filed can save you time, money and distress and give you stronger footing for contesting the other claim. In some situations, the mere fact that you’ve retained an insurance attorney is enough to prompt a rival claimant to drop the claim. If they don’t, your attorney will represent you before the insurance company and will negotiate for you if the case goes to arbitration.

Under What Circumstances Will an Insurer File a Life Insurance Interpleader?

Television programs sometimes dramatize disputes between family members over who will be the beneficiary of a life insurance policy when someone passes away. In the real world, there are many reasons why an insurance provider might file an interpleader, including:

  • In the event of suspected foul play in the death of the insured, particularly if a beneficiary is a suspect in the investigation
  • If the policy holder was killed by the named beneficiary, who then killed themselves
  • When it appears that a recent change in the life insurance policy may have been the result of fraud, duress or undue influence
  • When both a current and ex-spouse claim to be beneficiaries
  • The individual was divorced but didn’t change the beneficiary but lives in a state where life insurance policies are automatically revoked when the divorce is formalized
  • An ex-wife or ex-husband is entitled to the proceeds of a life insurance policy as part of the final divorce settlement
  • When children from more than one marriage have a claim to the funds due to an obligation to maintain life insurance for child support benefits
  • The policy doesn’t indicate who the beneficiary was
  • The insured individual talked about changing the beneficiary and had begun the paperwork, but had not yet submitted it to the insurance company
  • The insured individual didn’t follow the appropriate guidelines set forth by the insurance company for changing the beneficiary

What to Do When a Life Insurance Claim is Disputed

If you fear there will be a dispute over who the beneficiary is of a life insurance policy or you suspect some kind of fraud that could lead to a life insurance interpleader, be sure you have copies of the relevant policy naming you as the beneficiary, then contact us for a free consultation. We will be happy to review your case and assist you in any way we can. We work on a contingency basis, which means you won’t pay a dime unless we win your case and you get the life insurance proceeds, when we will collect a small percentage to cover the legal fees.

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When someone obtains life insurance, they must designate a beneficiary. After they pass, the beneficiary is entitled to file a claim with the insurance company.

When there are multiple competing claims, to the same policy, insurance companies file a lawsuit to have the court settle it. This is called an Interpleader.

An Interpleader typically arises because of a defect in the designation or changing of a beneficiary. This often means paperwork errors. These errors can compound over time and lead to multiple people being named as beneficiary.

Since insurance companies are responsible for paying the right person, they often prefer the decisiveness of the legal system. Additionally, a court’s decision can shield them from liability.

Insurance companies also happen to be lazy. If they even sniff a whiff of conflict, representatives know to prepare for lawyers. A wrong decision can cost thousands in investigation costs and penalties. If insurance companies can avoid these expenses they will. By passing the responsibility to courts, insurance companies simply show up and give the money to whoever the judge tells them.


No beneficiary designated, more than one spouse designated, failure to comply with divorce ruling, slayer statues or beneficiary murdering the insured, fraud, duress, simultaneous death of beneficiary and insured, allocation of more than 100%, failure to properly change beneficiary, undue influence, or failure to follow policy guidelines.


An Interpleader action usually begins with the insurance company notifying all interested parties of their pending court proceeding. This is typically done with a process server delivering court documents and notice of hearings to all interested.

Right before the proceeding, the insurance company places the total policy in the court’s trust. At this point the money literally leaves the hands of the insurance company.

Our goal is to prevent this. Court proceedings can be very long and tough on families and relationships. Some cases can go years without every yielding benefits. If you believe you are facing this situation, please contact us immediately. We can conduct investigations and research, before the insurance company passes the buck.


Arbitration can occur before or during the interpleader process, depending on local court rules. These hearings can occur because of a provision in your life insurance policy or because of a mandatory jurisdiction rule.

An arbitration is generally a proceeding in front of an impartial 3rdparty. The 3rdparty makes a decision and this decision becomes final and binding on both parties.

Arbitration can sometimes lead to a loss of legal protections, bias decisions, or a denial of discovery. Additionally these proceedings are completely confidentiality. So if you get screwed, no one will ever know. It’s best to consult an attorney before an arbitration.


In 1961, Edward obtained life insurance through Mutual Benefits. At the time, he designated Ellen, his wife, and his future children as his primary beneficiaries. Thirty-four years later, Edward and Ellen divorced.

On December 17, 2011, Edward faxed a letter to his insurance carrier asking to change the beneficiary to Dreama, his new lover.

Three days later he passed away.

Shortly thereafter, Dreama and Ellen filed claims for his life insurance policy.

The court eventually ruled in ex-wife’s favor, stating that Edward failed to properly follow the procedures of his policy. Edward was required to have two witness observe and sign his change of beneficiary document, he did not. Instead he faxed a generic letter stating he wanted the insurance company to change it.

Twenty years after their divorce, Edward’s ex-wife still got the benefits.

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Paul was employed by the Department of Justice in Chicago, Illinois. As an employee of the Federal Government, Paul was entitled to the FEGLI Program.

In 2009, Paul divorced his then wife Katherine. During the dissolution, the court ordered Paul to maintain insurance on his life and to designate his two children as 50/50 beneficiaries of his FEGLI policy.

While conducting periodic investigations of Paul, the DOJ interviewed Kathrine. While being interviewed, Kathrine filed a certified copy of their divorce with the agent. Shortly thereafter, Paul filed an uncertified copy with the government. The agent never filed Kathrine’s copy.

In 2012, Paul married Lori. Days later he filed a change of beneficiary form and named Lori as the primary beneficiary.

Paul died 8 months later.

Katherine filed claims as guardian of his children E.A.B. and H.M.B., based on their divorce, and Lori submitted her claim based on her designation as a beneficiary.


Lori argued that she was entitled to the money because Paul’s policy required a “certified copy of the court order” be “received” by the employer.

Since Kathrine’s copy was lost, Lori argued her designation was invalid.

The court disagreed, stating that the agent was a permissible government official.

His failure to deliver the dissolution did not invalidate it. Since the agent worked for government and was within his duties to deliver the document, Kathrine properly filed her certified dissolution. The court awarded Paul’s policies to his children.

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A policy benefitting “my kids”

The case involved a man named George. George was a member of the local electrical workers’ union. He had been employed by the same construction company for over 30 years. Through the union, George was eligible for several benefits, including a relatively lucrative life insurance policy with a $250,000 payout.

George first applied for the policy in 1978. At the time, George and his first wife had two children, Joseph and Julie. When the life insurance company granted George the policy, it asked him to make a beneficiary designation on an official form. On the space provided for the beneficiary designation, George simply wrote “my kids.”

Twenty years later, in 1998, George was remarried to a woman named Sandra. George and Sandra had two children of their own, Christopher and Michael. At no time after 1978 did George seek to revise the beneficiary designation in his life insurance policy. In fact, given that his premiums were paid by the union, he never gave that policy a second thought.

Anyone who knew George would tell you that Christopher and Michael where every bit as important to him as the children from his first marriage. Indeed, as George aged, he would often make statements about his intention to provide for all of his children upon his death. Notwithstanding their father’s love, the two sets of children we're not particularly fond of one another.

What did George intend when he used the phrase “my kids”?

In 2005, George passed away unexpectedly for a heart attack. His two older children had long been aware that their father had named them as beneficiaries to his life insurance policy. Thus, Joseph and Julie both made a claim for policy benefits within weeks of their father’s death.

After George died, however, his current wife received copies of all paperwork relating to his employment and his union membership. Among those papers was a copy of his life insurance policy documents. She read the policy documents thoroughly and noticed that George head named “my kids” as his policy beneficiaries. As such, she made a claim with George’s life insurance company on behalf of the two younger children. She knew how much George loved all of his children, and honestly believed he would have wanted the $250,000 payout to be split equally amongst all four of them.

An action in interpleader

Rather than making a policy payout to any of the potential beneficiaries, George’s life insurance company filed what is called an “action in interpleader.” Basically, the insurance company, as the plaintiff in the lawsuit, claimed that it had conflicting claims against the policy. The company needed the court’s guidance in determining who it should pay as between George’s four children.

No one was prepared to be served with a formal complaint. Joseph and Julie quickly contacted a lawyer specializing in the wrongful denial of life insurance claims. Even though their claim had not technically been denied, they were shocked and frightened by being named as defendants in a lawsuit. They really did not know what to do and thought a specialized lawyer was necessary. They were right.

Their lawyer had seen this very situation many times before. He knew that a life insurance policy – like any contract -- had to be interpreted in light of the facts in existence at the time the contract was entered. In this case, that meant the court had to look at what George meant by the phrase “my kids” when he made his initial beneficiary designation.

Of course, since that designation was made some 20 years before the younger children were born, the court had no choice but to decide that Joseph and Julie were entitled to the full policy benefit. Even though there was plenty of evidence that George had made statements about providing for all of his children, the court had no basis for looking beyond the four corners of the actual policy documents. Indeed, the court stated that had George wanted to update his policy designation, he could have done so at any time after his second two children were born.

Interpleader actions can be confusing for everyone involved. In this case, Joseph and Julie did the right thing – they contacted an attorney who specialized in this area of the law. Unfortunately, we often run into people who were so intimidated by the filing of a lawsuit against them that they simply ignored the issue altogether. In some instances, that meant they lost out on benefits they were rightly entitled to.

If you have questions about an interpleader action or any other denial of life insurance benefits, please don't hesitate to call our office. Your initial consultation is free and we will help in any way that we can.