Life insurance interpleaders

Texas and federal law provides that an insurer faced with rival claims to policy proceeds can interplead the funds, join the rival claimants, and be discharged from further liability. This provides a safe way for the insurance company to avoid liability for paying the wrong claimant.

Upon receiving notice of a contest, most insurance companies will send a pre-interpleader letter to the competing claimants. This letter will typically provide notice of competing claims to the policy proceeds and that the insurance company will allow 30 to 60 days for the parties to negotiate a compromise. If the dispute is not resolved, the life insurance company will file the interpleader lawsuit.

After the competing parties appear in the interpleader case, the insurance company typically seeks an agreed order of dismissal. If the parties agree, the order typically provides an award of some attorney’s fees from the policy proceeds for the insurance company’s pursuit of the interpleader. If the parties do not agree, the court will consider the amount of reasonable and necessary fees for the insurance company. The awarded fees will generally be much lower if the competing parties agree to dismiss the insurance company as soon as possible after it files the interpleader.