When there are Multiple Possible People With a Right to Life Insurance Proceeds Interpleader is Required

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When a life insurance company is faced with multiple claimants to the proceeds of a life insurance policy and is ready to pay but cannot decided to whom it should pay. In 5 Star Life Insurance Company v. Monica Smith, et al., 2:19-cv-00095-ACA, USDC (October 23, 2020) 5 Star Life Insurance Company’s (“5 Star”) moved to decide guardian ad litem Cindy Webb’s AND and 5 Star’s petition for attorney’s fees.

ZALMA OPINION

Although usually the insurer interpleading funds into court will have its fees paid from the interpleaded funds. However, since the proceeds of the policy was limited, and insurers are not a favored litigant, the guardian was paid and the insurer was not paid so the children could get more money. It is appropriate for a court, acting in equity, to do as did the USDC and the insurer was protected from the competing claims. Interpleader is an important tool to any insurer faced with multiple claims against the proceeds, whether life, property or casualty insurance.