A life insurance interpleader case can be filed in either federal court or state court, depending on the policy, the parties involved, and the legal basis for jurisdiction. There is no single rule that applies to every interpleader. The forum is driven by law, not by preference. When you are facing an interpleader lawsuit, we are here for you. Look at our interpleader fact sheet for more information.
Here is how it works in practice.
When a life insurance interpleader is filed in federal court
Many life insurance interpleaders end up in federal court because federal law makes it easier for insurers to file there.
Statutory interpleader (most common)
Insurers often rely on the federal interpleader statute. This requires only minimal diversity, meaning at least two competing beneficiaries live in different states, and the policy amount is at least $500. The insurer deposits the policy proceeds with the court and asks to be dismissed. This is why multi state beneficiary disputes are so often filed in federal court.
Diversity jurisdiction
An interpleader may also be filed in federal court under standard diversity jurisdiction if the parties are citizens of different states and the amount in dispute exceeds the federal threshold. This route is used less often because it requires stricter diversity rules.
ERISA governed policies
Employer provided group life insurance policies are usually governed by ERISA. ERISA is federal law and it preempts most state laws. Interpleader cases involving ERISA policies must be heard in federal court. State courts do not have authority over ERISA benefit disputes.
When a life insurance interpleader is filed in state court
An interpleader will usually stay in state court when federal jurisdiction does not exist.
This typically happens when:
• All claimants are residents of the same state
• The policy amount does not meet federal requirements
• The policy is a private individual policy governed solely by state law
• The dispute involves probate or state specific beneficiary statutes
State courts regularly handle interpleader cases involving individual life insurance policies, divorce related beneficiary disputes, and competing family claims under state law.
Why insurers often prefer federal court
Federal court offers insurers several advantages:
• Easier jurisdiction under statutory interpleader
• Uniform procedural rules
• Nationwide service of process
• Faster dismissal of the insurer after depositing funds
That is why many beneficiaries are surprised to receive federal court papers even though the policyholder lived locally.
Does the court affect the outcome
It can. The forum determines:
• Which law applies
• What deadlines control
• Whether ERISA preemption applies
• How beneficiary disputes are analyzed
• What defenses are available
Missing deadlines in either court can result in default and permanent loss of the proceeds.
Bottom line
A life insurance interpleader can be filed in federal court or state court. Federal court is common when there are out of state beneficiaries or ERISA policies. State court is common for purely local disputes under state law.
If you have been named in an interpleader lawsuit, the most important issue is not which court it is in, but acting quickly. Once an interpleader is filed, the case is already active and deadlines start immediately.