When two or more people claim the same life insurance proceeds, the insurance company often refuses to decide who should be paid. Instead, it may file a legal action called an interpleader lawsuit. In an interpleader, the insurer deposits the policy proceeds with the court and asks a judge to determine the rightful beneficiary.
The example below shows how a typical life insurance beneficiary dispute leads to an interpleader lawsuit and how courts analyze competing claims.
Background of the Beneficiary Dispute
A policyholder purchased a life insurance policy while married and named their spouse as the beneficiary. Several years later, the couple divorced. After the divorce, the policyholder entered into a new long term relationship.
There was uncertainty about whether the policyholder updated the beneficiary designation after the divorce. The insurer’s records were unclear, and no properly processed beneficiary change form could be located.
After the policyholder’s death, both the former spouse and the new partner submitted claims for the life insurance proceeds. Each claimed to be the rightful beneficiary under the policy and applicable law.
Because paying one claimant could expose the insurer to a lawsuit from the other, the insurance company filed an interpleader action. The insurer deposited the full policy amount with the court and asked to be dismissed from the case. The court then assumed responsibility for deciding who should receive the proceeds.
Legal Standards for Changing a Life Insurance Beneficiary
A key issue in most interpleader cases is whether a beneficiary change was properly completed.
Some states require strict compliance with policy requirements. This usually means the beneficiary change must be in writing, signed by the policyholder, and received by the insurance company before death. If those steps were not followed, courts in these states often rule that the original beneficiary designation controls.
Other states apply a more flexible approach. Courts may honor a beneficiary change if there is clear evidence of the policyholder’s intent, even if the insurer never formally processed the change. Evidence may include signed but unsubmitted forms, written instructions, emails, or consistent actions showing intent to benefit a particular person.
The Effect of Divorce on Beneficiary Rights
Divorce frequently complicates beneficiary disputes. Many states have statutes that automatically revoke a former spouse’s beneficiary status upon divorce unless the policyholder reaffirmed that designation afterward.
In this example, the court had to decide whether a revocation upon divorce statute applied, whether it was overridden by federal law or policy language, and whether the policyholder took any steps after the divorce to keep the former spouse as beneficiary.
These determinations often control the outcome of the case.
Issues the Court Must Resolve
To decide who receives the life insurance proceeds, the court must address several questions:
Which state’s law governs the policy
Whether a valid beneficiary change occurred
Whether divorce revoked the former spouse’s beneficiary rights
Whether the policyholder’s intent can be clearly proven
Whether equitable principles should apply if the evidence is incomplete
If the evidence strongly favors one claimant, the court may award the full proceeds to that person. If the evidence is mixed, courts sometimes encourage settlement or apply equitable doctrines to resolve the dispute.
Why Legal Representation Matters in Interpleader Lawsuits
An interpleader case is not an insurance claim review. It is a civil lawsuit governed by procedural rules, filing deadlines, and evidentiary standards. Each claimant must file an answer, assert legal defenses, and present admissible evidence.
These cases commonly arise in blended families, post divorce situations, informal beneficiary changes, and estate planning mistakes. The outcome often depends on technical policy language, statutory interpretation, and how evidence is presented.
Experienced legal representation can significantly affect the result.
Our Experience With Life Insurance Interpleader Cases
Our firm represents beneficiaries nationwide in life insurance interpleader lawsuits. These cases often involve substantial benefits and emotionally charged family disputes. We focus on identifying the controlling law, assembling strong evidence of beneficiary rights, and protecting our clients throughout the litigation process.
If you have been named as a defendant in a life insurance interpleader lawsuit or are facing a beneficiary dispute, prompt legal action is critical.