What To Do When You Are Entitled To A Benefit From An Insurance Company And The Insurance Company Sues You Because Somebody Else Also Claims That Benefit
You are entitled to a benefit from an insurance company from a life insurance policy or an accidental death and dismemberment (AD&D) policy because somebody died. But one or more other persons also claims to be entitled to the same benefit. Instead of paying you or the other person, the insurance company sues you and the other person. This is called an “interpleader” suit. What do you do?
When two or more people inconsistently with each other claim or can claim the same life insurance or other benefit, the law allows the insurance company to use a procedure called an “interpleader.” In an interpleader suit the insurance company sues all the persons who inconsistent with each other claim the same benefit. In an interpleader suit the insurance company admits that somebody is entitled to the benefit and that it owes somebody money, but because more than one person is or may claim the same benefit/money, and because the insurance company does not know whom to pay, rather than paying one person and likely being sued by the others, the insurance company sues all possible claimants of the benefit/money, deposits the money with the court, and asks the court to decide who gets it.
Interpleader suits often but not always sinvolve disputes over domestic relations orders – orders or judgments issued in state family law courts. There are lots of different kinds of domestic relation orders. But under ERISA only a qualified domestic relations order (QDRO) can operate to change who gets a benefit from an ERISA benefit plan. Under ERISA a domestic relations order that is not a qualified domestic relations order (QDRO) has no legal effect on the decision as to who gets life insurance or AD&D or any other ERISA benefit. Whether or not a state court domestic relations order is a QDRO under ERISA is a complex question.
One common type of ERISA-governed interpleader claim arises when a domestic relations order requires one divorcing spouse to maintain a life insurance or other benefit and name the other spouse or a minor child as the beneficiary, but that spouse names somebody else as the beneficiary and then dies. If the domestic relations order is a qualified domestic relations order (QDRO) then the ex-spouse or minor child named in the QDRO will get the life insurance or other benefit even though the deceased person named someone else as his or her beneficiary. However, if the domestic relations order is not a qualified domestic relations order (QDRO), then the person named as beneficiary will get the life insurance or other benefit even though the ex-spouse or minor child was named in a domestic relations order that required the deceased person to name the ex-spouse or minor child as the beneficiary.
Another common ERISA-governed interpleader fact pattern arises when a person has life insurance or other benefit through his or her employment but dies without designating a beneficiary. If the deceased person had a will, then the will may specify who gets the life insurance or other benefit. If a deceased person did not have a will then that benefit will be distributed according to state intestate succession law. Either way, more than one person may have a claim for all or part of the life insurance or other benefit and the insurance company may sue all of them in an interpleader action.
If you are entitled to a life insurance or other benefits as a result of a death of another – either because you are the named beneficiary or because you have a QDRO which required the deceased person to name you as the beneficiary, and you are sued by an insurance company or ERISA plan in an interpleader action, and you do not understand your rights and want legal representation, contact the ERISA Law Center. We can help you. Our lawyers have experience handling interpleader claims by insurance companies under such circumstances. Contact us at 866-360-0983 or 559-549-6490 to begin fighting for what you deserve today.