Why Did the Life Insurance Company File an Interpleader Lawsuit?
A life insurance company files an interpleader lawsuit when more than one person claims the same policy benefits and the insurer wants a court to decide who should be paid. Interpleader allows the insurer to avoid liability by depositing the policy proceeds with the court and stepping out of the dispute.
Interpleader usually means there is a serious beneficiary conflict, not that the policy is invalid.
What Triggers an Interpleader Action
Life insurance companies typically file interpleader when:
• Two or more people submit competing claims
• A beneficiary designation is challenged or unclear
• Divorce or remarriage creates conflicting claims
• Estate representatives dispute beneficiary status
• Allegations of fraud or undue influence arise
Rather than choosing a side, the insurer asks the court to decide.
Does Interpleader Mean the Insurance Company Is Denying the Claim?
No. Interpleader is not a denial. The insurer is admitting the policy is payable but claims it cannot determine the rightful beneficiary on its own.
The dispute shifts from the insurer to the claimants.
What Happens to the Life Insurance Money in Interpleader?
In most cases, the insurance company deposits the policy proceeds with the court. The funds are held until the court resolves the dispute.
Once the money is deposited:
• The insurer often asks to be dismissed from the case
• The remaining parties litigate against each other
• The court determines who is entitled to the funds
Who Pays Attorney Fees in a Life Insurance Interpleader?
Insurers sometimes ask the court to deduct their attorney fees from the policy proceeds before distributing the remainder. Courts do not always grant this request, especially when the insurer contributed to the dispute or delay.
Claimants should pay close attention to fee requests.
What Are Claimants Required to Do in an Interpleader Case?
After interpleader is filed, each claimant must:
• File a response or answer with the court
• Assert their legal right to the policy proceeds
• Present evidence supporting their claim
• Meet court deadlines and procedural rules
Failing to respond can result in losing rights to the funds.
Can an Interpleader Be Contested?
Yes. Claimants can challenge whether interpleader was appropriate, dispute fee deductions, and argue entitlement to the proceeds. Interpleader does not determine who wins. It only sets the stage for the decision.
What to Do If You Are Named in a Life Insurance Interpleader
If you have been served with interpleader papers:
• Do not ignore court documents
• Obtain the policy and beneficiary records
• Preserve all communications with the insurer
• Understand that the dispute is now in court
• Act promptly to protect your claim
Interpleader cases move quickly once filed.
Related Guidance
For a broader discussion of beneficiary disputes and interpleader actions, see our Life Insurance Interpleader page, and Life Insurance Interpleader Fact Sheet.
If a life insurance company has filed an interpleader lawsuit, the outcome depends on how the competing claims are presented and resolved in court.
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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“The insurer said there was a misstatement in the application and flat-out denied the claim. I contacted the Lassen Law Firm, and they immediately launched a legal challenge. In the end, they got the full benefit paid without me even stepping into a courtroom.”- Karen D.
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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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