Life Insurance Interpleader Lawsuits Fact Sheet
Christian Lassen, Esq. | Quoted in The Wall Street Journal | 25 Years Experience Helping beneficiaries nationwide resolve life insurance interpleader disputes.
This fact sheet explains how life insurance interpleader lawsuits work, what beneficiaries should expect after being sued, and how courts resolve competing claims.
If you are currently named as a defendant in a life insurance interpleader lawsuit, see our main Life Insurance Interpleader Lawsuits page for a full legal breakdown and litigation guidance.
Quick Overview of Life Insurance Interpleader Lawsuits
A life insurance interpleader occurs when an insurance company files a lawsuit asking a court to decide who is entitled to policy proceeds. Instead of paying the claim, the insurer deposits the funds with the court and names all potential claimants as defendants.
Once the insurer deposits the funds, it typically seeks dismissal from the case. After dismissal, the insurer no longer participates and the beneficiaries litigate entitlement to the proceeds.
Why Insurers Use Interpleader
Insurance companies use interpleader to protect themselves from liability. When faced with competing claims, unclear beneficiary designations, or allegations of wrongdoing, insurers often choose litigation over investigation.
Interpleader is sometimes used even when the rightful beneficiary could be identified through reasonable claims handling.
Courts and Laws Governing Interpleader
Interpleader lawsuits are commonly filed in federal court under Rule 22 or the federal interpleader statute. Group life insurance policies issued through employers are often governed by ERISA, which changes how beneficiary disputes are decided.
The governing law determines priority, defenses, and available remedies.
What Happens If You Ignore an Interpleader Lawsuit
Ignoring an interpleader lawsuit can result in default judgment. Courts may award the proceeds to another claimant without considering your evidence or arguments.
Deadlines are strictly enforced and extensions are not automatic.
Documents That Matter Most
Important documents include the life insurance policy, beneficiary designation forms, divorce decrees, separation agreements, employer records, correspondence with the insurer, and medical or capacity related records when undue influence is alleged.
Failure to preserve and organize these documents early can severely weaken a claim.
Common Mistakes Beneficiaries Make
Beneficiaries often miss response deadlines, assume the insurer is neutral, rely on verbal assurances, fail to oppose insurer fee requests, or underestimate the complexity of interpleader litigation.
These mistakes frequently result in reduced recoveries or complete loss of benefits.
Can Interpleader Cases Be Settled
Many interpleader cases resolve through settlement. Claimants may negotiate directly, use mediation, or resolve disputes through voluntary disclaimers. Some settlements require court approval.
Early settlement can reduce costs, but should be pursued strategically.
How Attorney Fees Are Handled
Insurers often request reimbursement of attorney fees from the deposited funds. Courts may reduce or deny these requests depending on the circumstances.
Beneficiary attorney fees are typically handled through contingency or litigation fee arrangements.
Frequently Asked Questions
What happens if there are multiple beneficiary forms
Courts determine which designation controls based on compliance, timing, and governing law.
Does divorce automatically revoke a beneficiary
In many states it does, but exceptions apply and federal law may override state statutes.
Do I need a lawyer
Yes. Interpleader lawsuits involve complex procedural and substantive law.
How We Help
We represent beneficiaries named in life insurance interpleader lawsuits nationwide. Our work includes analyzing governing law, building evidentiary records, challenging improper claims, negotiating settlements, and litigating cases through judgment.
Key Takeaways
Interpleader is a lawsuit, not a claim review. Beneficiaries must actively defend their rights. Early legal action often determines who receives the proceeds.
Free Case Evaluation Contact Us!
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
Our FAQ
Have questions? We are here to help. Still have questions or can't find the answer you need? Give us a call at 800-330-2274 today!
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A grace period is the time after a missed payment during which the policy remains in force, usually 30 to 60 days depending on state law and policy terms.
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No. In most states, insurers must send a written notice of overdue premiums and warn of pending lapse before terminating coverage.
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The policy may still be enforceable. Beneficiaries can challenge the lapse based on the insurer’s failure to provide required notice.
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Yes. If the insured dies during the grace period, the policy is still considered active, and benefits should be paid.
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Yes. In group life insurance policies, employers sometimes fail to forward premiums properly, leading to wrongful lapse denials.
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Yes. If automatic payment setups fail through no fault of the insured, lapses may be challenged.
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Some policies automatically borrow against cash value to cover missed payments. Failure to apply this correctly can lead to wrongful lapse claims.
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Possibly. Some courts excuse nonpayment if the insured was mentally incapacitated and missed premiums without proper notice.
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No. Reinstatement must occur while the insured is alive, but wrongful lapse denials can still be challenged posthumously.
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Not without following strict notice and grace period rules. Beneficiaries can often challenge technical denials.
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Deadlines vary by state, but it’s critical to act within 1 to 5 years depending on the policy and jurisdiction.
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Not necessarily. Payments mailed within grace periods or accepted by insurers may keep coverage active.
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Bank records, payment receipts, insurer correspondence, and premium notices are key evidence.
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If the insurer used an outdated address despite updated information, lapse denials can often be overturned.
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Possibly. If the insured submitted a reinstatement application before death, it may help challenge a lapse denial.
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In some states, special grace periods and protections applied during COVID-19 emergencies. They can help fight wrongful lapses.
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Only if the insurer followed all legal notice and grace period requirements. Otherwise, beneficiaries may still recover.
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Misapplied premiums can lead to wrongful lapses — and courts often hold insurers accountable for these errors.
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An attorney can obtain records, challenge improper lapses, negotiate settlements, and litigate if necessary to enforce payment.
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“My husband didn’t list a prior policy cancellation, and they used that to deny our claim. Lassen Law proved it was irrelevant and unrelated to the cause of death. We received the benefit without a prolonged legal battle.”- Daniel S.
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With over two decades of exclusive focus on life insurance litigation, we’ve helped thousands of families recover wrongfully denied benefits. Our reputation for fast, strategic resolutions has made us a trusted national resource for complex claim disputes.
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