As lawyers who specialize in the wrongful denial of life insurance claims, we wish every person who received a claim denial letter called our office for help. After all, we know that a great percentage of those claim denials are bogus and are simply a way for the insurer to attempt to avoid making a valid payout. Unfortunately, many people who receive claim denial letters are simply too bereft to question the insurance company. Consequently, they accept the insurer’s initial decision and move on without collecting the benefit that was intended for them.
There’s another category of people who receive correspondence from life insurers who do end up calling our offices the great majority of the time. These are people who have had their initial claim delayed significantly and suddenly find themselves on the receiving end of a lawsuit filed by the life insurance company. Most are surprised, confused, shocked, or even indignant. They’re wondering how, as someone who was simply named as a beneficiary in a life insurance policy, they can now be named parties to a lawsuit.
Fortunately, once these people call our office, we can quickly put their fears to rest. Generally speaking, a life insurance company files a lawsuit against beneficiaries in one circumstance – the policyholder has died and now multiple people are claiming to be the rightful beneficiary under his policy. When this happens, the life insurer files what’s called an “action in interpleader.”
An action in interpleader is nothing more than the insurance company’s cry for help. It doesn’t know who, among all the alleged beneficiaries, it should pay. It doesn’t want to risk making a decision only to be sued by another purported beneficiary down the line. Thus, it files a lawsuit that basically asks the court to hear all the relevant evidence concerning the policy, and then to make a binding decision about who should get paid.
If the policyholder named a beneficiary, why would interpleader ever be necessary?
In most cases, an interpleader action isn’t necessary. In a perfect world, the policyholder names one beneficiary and, for the life of the policy, intends for that beneficiary to collect his death payout. Under those circumstances, the insurance company has no problem paying the named beneficiary. Life, however, is often not that simple.
Here are the most common scenarios that necessitate interpleader actions:
Divorce: Life insurance is often one of those things people obtain and then forget about. This is especially true if premiums are paid by an employer or automatically deducted from a paycheck. Policyholders have a vague recollection that they have a policy, but there’s rarely a reason to think about it.
That’s all fine and good, except most married individuals name their spouses as sole beneficiary under their life insurance policy. As you know, nearly half of U.S. marriages end in divorce and many people end up getting remarried in short order. When that happens, a surprising number of policyholders forget to change the beneficiary designation in their policy to name their new spouse.
Moreover, some states legally prevent a divorcing spouse from changing his beneficiary. Still other states mandate that the new spouse must be recognized as the intended beneficiary. With all this legal chaos in the works, it’s no wonder that life insurance companies often turn to the courts when an ex-spouse and a current spouse are both claiming benefits under a life insurance policy.
The named beneficiary pre-deceases the policyholder: In other cases, a beneficiary will pass away before the policyholder dies. In light of the grief that may accompany such a loss, it’s no surprise that policyholders often forget that they need to change their beneficiary designation. Yet, if they don’t make a change, it’s as if they’ve failed to name a beneficiary at all.
In these cases, multiple people may try to make a claim for death benefits. It could be the policyholder’s children, step-children, friends, or caregivers who claim entitlement to the payout. Even though state law may give guidance for who should actually receive the money, insurance companies typically still seek the court’s guidance through an action in interpleader.
Undue influence: An unfortunate reality of modern society is that as people age or fall ill, few families can care for their loved one’s ongoing needs. Thus, many families hire caregivers who often provide round-the-clock care for the ailing individual. While most of these caregivers are saints, some are unscrupulous characters.
In the life insurance context, that can mean that a caregiver convinces a sick or dying person to name that person as the primary beneficiary under a life insurance policy. While that decision can be legitimate if made with a sound mind, all too often an ailing person is coerced into making a beneficiary change while under the influence of heavy painkillers, or otherwise suffering from a mental disability.
Typically, it’s not until the policyholder dies and the original beneficiary files a claim that he learns of the change. At that point, the life insurance company doesn’t want to make a decision about who the legitimate beneficiary is – and an action in interpleader is quickly filed.
Ultimately, it is important for you to know that just because you’ve been named in an interpleader action does not mean you’ve done anything wrong. If you believe you’re the rightful beneficiary under a life insurance policy, it is best that you contact an attorney specializing in the wrongful denial of life insurance claims to help you sort it all out.If you’ve been served with an interpleader lawsuit, please don’t hesitate to contact our attorneys today. We’ll provide an initial consultation at no charge. If the facts suggest you’re the rightful beneficiary, we’ll take your case will not ask you to pay us unless and until you recover money from the insurer. We know this is a difficult time. You may be confused and a little bit angry. That’s ok. Call us. We’re here to help.