The Interpleader Process
What an interpleader is
When multiple people claim to be the rightful beneficiary of a life insurance policy, the life insurance company typically does not try to determine who has the rightful claim.
Paying the wrong person can expose the life insurance company to a lawsuit from a disgruntled claimant and even result in double liability.
Instead of taking chances, insurance companies can file a type of lawsuit known as an interpleader.
How interpleader suits work
An interpleader lawsuit allows someone holding disputed funds (like an insurance company) to file a lawsuit and let a court decide the proper owner.
The interpleader prevents the life insurance company from being obliged to determine - at its peril - which person has the better claim.
As part of the process, the insurance company will name the competing claimants as defendants, deposit the money with the court, and typically obtain an order releasing the insurance company from any liability.
The pre-interpleader letter
When faced with competing claims, the life insurance company will often send letters to each claimant notifying them that:
There is a dispute over the benefit
There is a period set to resolve the dispute informally
This notice is what is commonly known as a pre-interpleader letter.
When to contact a lawyer
If the dispute cannot be resolved at this stage - during the pre-interpleader period - the claimants and their lawyers will appear in the interpleader lawsuit.
If you have not already hired a lawyer it is very important to do so after you receive a pre-interpleader letter from an insurance company - or if you have been told by an insurance representative that a contest has been asserted.
Consultations are free and confidential.