As lawyers who specialize in the wrongful denial of life insurance claims, we often write about an insurance company that has issued a claim denial based on completely illegitimate reasoning. Sometimes, however, a life insurance company simply can’t pay a claim. Such is the case when the insurer doesn’t know who the rightful beneficiary is.
This scenario can arise in a few different ways:
The policyholder names “my wife” as his beneficiary when he first obtains the policy, but later divorces and remarries. Which wife should the life insurance company pay?
The policyholder names “my children” as his beneficiaries. He has two children at the time he obtains the policy, but four children at the time he dies. Which children should the insurance company pay?
The policyholder fails to name a beneficiary at all.
In these instances, the insurance company can’t just randomly choose which among all potential beneficiaries it is going to pay. If it did, it would almost certainly be facing lawsuits from all the other potential beneficiaries who believed they were the ones who should have been paid. We rarely sympathize with life insurers, but these circumstances can cause a real dilemma.
So, what does an insurance company do in these circumstances? Fortunately, there is a legal process designed to alleviate all the confusion. The insurance company files a type of lawsuit known as “an action in interpleader.” In these cases, the life insurer is the plaintiff. It names each potential policy beneficiary as a defendant. Unlike in a normal lawsuit, however, this plaintiff is not seeking monetary recovery from the defendants.
To the contrary, the life insurer files an action in interpleader for one reason and one reason only – to ask the court to decide whom, among all the potential beneficiaries, should receive the policy payout. This process is convenient because it also gives each of those potential beneficiaries the opportunity to plead his or her case to the judge – in essence, to tell the judge why they should receive the death payout in lieu of all the others.
Of course, each case presents its own unique facts. This article explores one of the more bizarre interpleader cases we’ve come across. It should serve as a cautionary tale for those of you out there who have a life insurance policy or are considering getting one. You need to make certain that your beneficiary designation is crystal clear. If not, you may be creating all sorts of troubles for the people you leave behind
The case involved a guy named Mark. For the sake of anonymity, we’ll refer to him as Mark Jones. Mark came from one of those families that placed a high value on names and lineage. In light of that, you won’t be surprised to learn that the family consisted of all the following individuals: Mark Jones (age 87); Mark Jones, Jr. (age 70); Mark Jones, III (age 50); and “Little Mark” Jones (age 28).
For decades, Mark maintained a life insurance policy with the same company. Over the years, he made slight policy changes, but nothing that ever caused his insurance broker to question his motives. A couple of years before his death, Mark asked his broker for a Change of Beneficiary Form. Rather than returning the form to the broker, however, Mark mailed the form directly to the insurance company.
Given that the insurer was located several states away and no one there had ever met Mark personally, it didn’t raise any red flags when his Change of Beneficiary Form simply named “Mark Jones” as the sole beneficiary. When Mark eventually passed away, however, those red flags began to fly wildly.
Will the real Mark Jones please stand up?
After Mark passed away, both Mark, Jr. and “Little Mark” submitted claims against the eldest Mark’s life insurance policy. The life insurer, having received claims from a Mark Jones, Jr. and Mark Jones, IV, suspected that there might be at least one other “Mark” who could be the beneficiary. After a brief investigation, the insurer located Mark Jones, III.
The insurance company was at a complete loss with respect to who it was supposed to pay. Thus, it filed an action in interpleader and named Mark Jones, Jr., Mark Jones, III, and “Little Mark” Jones, IV as defendants. This forced the three men to try to prove to the court that they were the intended beneficiary under the policy.
When “Little Mark” was served with the interpleader lawsuit, he immediately contacted a lawyer specializing in the denial of life insurance claims. He explained to the lawyer why he thought he was the true beneficiary: (1) his great-grandfather had told him several times that he was the designated beneficiary under the policy; (2) he had lived in his great-grandfather’s home and cared for him during the last three years of his life; and (3) he had a letter from his great-grandfather that said, “Little Mark, after I die, you should be ok financially once the life insurance kicks in.”
The lawyer quickly did some digging to see if the other Marks had similar evidence. They did not. Thus, “Little Mark’s” lawyer suggested that all parties attend mediation on the matter. Everyone agreed. At the mediation, the lawyer presented the evidence received from “Little Mark.” He also got Mark Jones, III to admit he believed the life insurance payout was intended for the youngest Mark. Eventually, the mediator got everyone to agree that “Little Mark” was the rightful beneficiary. As a result, he received the full policy payout and the interpleader action was dismissed.It was unfortunate that Mark’s family had to go through formal legal proceedings in order to have his wishes honored. Keep this in mind when you’re naming a beneficiary under your policy. Or, if you are one of several beneficiaries who have been named in an interpleader action and you need legal representation, please don’t hesitate to call our attorneys. We’ll do everything we can to get you the payout that your loved one intended for you.