What is an Interpleader Action?
If you are named beneficiary and a family member makes a claim why can insurance company file an interpleader action?
An interpleader action is a legal proceeding which aims to resolve disputes between two parties. This is made up of one who claims a particular right over a certain property or money which belongs to a third party, or in this case the policy owner. It is a type of court proceeding that determines and evaluates the arguments presented by both parties before declaring the rightful claimant.
Interpleader action is very common in insurance policy claims, especially in cases where the policy holder is already deceased. At times, even if there is a declared beneficiary on the policy, other family members will still dispute the claim made by the listed beneficiary and argue that they are have more right over the policy.
Types of Interpleader Action
This type of interpleader action handles property which values more than $10,000. Any claimant not listed on the policy should be a resident of the state where the deceased policy holder resides. Otherwise the petition will not be acknowledged by the court. In any case, the stakeholder or the insurance company is tasked to post a bond which is equivalent to the amount being disputed before the interpleader action can be tried and discussed in court.
28 U.S.C.A. § 1335
This involves property which values less than $500 and allows complainants to be residents of different states.
Reasons for filing interpleader actions
Interpleader actions are filed in court so as to avoid multiple lawsuits on a single stake. It also aims to protect the stakeholder from potential multiple liability, which in this case is the insurance company. Thus, the complainant needs to submit multiple lawsuits on this particular policy before the court considers it an interpleader action.
This is towards the advantage of the stakeholder, which is the surety company. It frees them from the worries of deciding which among the claimants deserve to be given the property in question. The court handles both the investigation and the controversy behind it while leaving the stakeholder in peace after it provides the court with the equivalent amount of the property in question.
Interpleader action saves the insurance company from legal responsibilities like unreasonably delay or lags as well as the creation of pseudo cases. The burden of proof is now shifted to the rival claimants who need to provide sufficient proof that he or she is truly entitled to have the property of the deceased.
A perfect scenario for intepleader action filed by insurance company involves disputes regarding the cause of death of a policy holder. Suicide is never taken as sufficient ground for the beneficiaries to get any form of compensation. The death of an individual may be viewed by the company as triggered by suicide, thus giving them the liberty not to pay out the equivalent pay-out. Beneficiaries who are listed on the policy may claim otherwise and prove that this is not a case of suicide which will entitle both of them to the amount of the policy. Since there are two or more claimants and complainants directed towards the insurance company, the insurance company may simply request that the court consider this as a type of interpleader actions so the court will determine on its own if the arguments of the claimants are indeed true or not.
For the insurance company, interpleader is the perfect solution for the insurance company’s loopholes. It becomes true to the proverb that says, “Hit two birds with just one stone.”