Before an Interpleader Is Filed: Claims, Competing Claims and the Pre-Interpleader Letter

Before an interpleader is filed, there is usually a claim, a competing claim, a pause in payment and, very often, a letter from the insurer asking the claimants to work out the dispute or face an interpleader. The lawsuit is the second half. Few people know what to expect at this stage, and decisions made here can affect how long the case takes and how much is eventually paid. For what happens after filing, see named in an interpleader and how long a case takes.

The pre-interpleader letter

A common pattern: once an insurer has conflicting claims, each claimant receives a letter, sometimes called a pre-interpleader or adverse-claim letter. It says the insurer has received competing claims, urges the claimants to resolve the dispute among themselves, and warns that if they do not, within a set period that is often 30 days, the insurer will file an interpleader and let a court decide.

Court opinions describe letters of this kind:

• In a Tennessee case, the insurer “temporarily restrained the policy benefits and encouraged Defendants to resolve the matter themselves.” Its letters said “there is a beneficiary dispute regarding the proceeds” and that it “encourage[s] the parties to amicably resolve the matter themselves in order to preserve the policy benefits from potential litigation costs and fees,” and told the claimants that if they could not agree, it would have to interplead.¹
• In another Tennessee case, the insurer asked two claimants to reach an agreement and “stated that if they could not reach an agreement by April 7, 2011, it would file an interpleader action.” It filed on June 6, 2011, about two months after that date.²
• In a Louisiana case, the court described the insurer’s position that a letter dated May 28, 2013 told the claimants it would file an interpleader “if it did not hear from them within 30 days.” It filed on July 12, 2013.³
• In a Ninth Circuit case, the insurer “reiterated its plan to file an interpleader action unless” the two claimants “resolved their conflicting claims within 30 days.” Before it filed, the named beneficiary sued the insurer in state court.⁴

Letters differ from company to company and case to case. These examples show what courts have described; they are not a standard form.

Why insurers send it

An insurer that pays the wrong person can be sued and made to pay again. Interpleader solves that problem, but it costs money, and the insurer usually asks for its fees from the benefit. A letter that prompts the claimants to agree avoids both the lawsuit and the risk of paying twice. If the claimants settle, the insurer can pay according to their agreement, usually in exchange for releases. The Tennessee letter above made the cost point directly: an agreement would “preserve the policy benefits from potential litigation costs and fees.”¹

The deadline is the insurer’s, not the court’s

No court sets the deadline in a pre-interpleader letter, and nothing happens automatically when it passes. A claimant who does not respond does not lose a claim by missing it. Once a lawsuit is filed and served, however, real court deadlines apply, and missing the deadline to answer can lead to a default. See step 1: note your deadline.

Why filing is often delayed

It is common for the stated deadline to pass with no lawsuit, sometimes for months. The court records show gaps of different lengths:

• In the Tennessee case above, about two months passed between the stated date and the filing.²

• In a Washington case, a claimant submitted a claim on October 30, 2017, and “shortly after” the insurer was notified of a competing claim by another claimant’s lawyer. The insurer filed its interpleader on July 18, 2018, more than eight months after the claim.⁵

• In a Maryland case involving a homicide, the insurer received a claim in June 2020, contacted the police investigator between August 2020 and October 2021, and filed in October 2021.⁶

• An extreme case. In a Colorado case, the insurer filed its interpleader on December 12, 2019, about 16½ years after the insured’s death. Its complaint attributed the wait to an unresolved police investigation into the death and pointed to Colorado’s slayer statute, which revokes a beneficiary designation in favor of a person who commits a “felonious killing.”⁷⁸ The court made no finding about the death. Once the case was filed, it moved quickly. The court ordered the deposit of the policy proceeds together with “stipulated statutory post-mortem interest” on June 25, 2020, and the named beneficiary filed a notice of settlement in July 2020. On September 16, 2020, the court entered judgment on the parties’ joint stipulation. The judgment released and discharged the insurer, permanently enjoined the claimants from suing it over the policy, directed that the registry funds be disbursed “pursuant to Defendants’ confidential settlement of their competing claims,” and dismissed the case with prejudice.⁹

• A letter, then a lawsuit by a claimant. In a Louisiana case, the claimants were told the insurer would interplead if they did not resolve the dispute, but no interpleader was filed. In July 2024 one claimant sued in Louisiana state court. The insurer removed the case to federal court on August 8, 2024, and only then, on or about September 5, 2024, did it answer and assert interpleader claims against the competing claimants. The court ordered the deposit on September 27, 2024, and entered a final judgment on the parties’ settlement on January 13, 2025.¹⁰ Once a claimant files suit, the insurer’s timetable no longer controls. See when a claimant sues first.

Delay can have ordinary causes: the insurer may be gathering records, waiting for one side to respond, waiting on a criminal investigation, locating claimants, or simply working through its own litigation process. It can also mean the matter has a low priority. Either way, the waiting period is time the claimants can use.

What claimants can do in the gap

• Negotiate. Claimants can talk to each other, directly or through lawyers, about dividing the benefit. A written settlement and release, signed by everyone with a claim, often lets the insurer pay without a lawsuit and avoids fees coming out of the fund. If a claimant is a minor or lacks capacity, a settlement usually needs a legal representative and may need court approval; see settlements involving minors.
• Document the claim. Keep the claim forms, the death certificate, the policy and beneficiary forms, and every letter. Put new information in writing to the insurer.
• Check interest rules. Some state laws require interest on death benefits, so delay can increase the amount owed, though the rules vary. See state interest statutes.
• Ask the insurer to file. If the claimants cannot agree, a claimant can tell the insurer so in writing and ask it to file the interpleader, or to explain what it is waiting for. A written request also creates a record of the delay.
• Consider suing first. A claimant does not have to wait for the insurer. A claimant can sue the insurer for the benefit, and the insurer will usually respond by interpleading the other claimants. See when a claimant sues first.

How delay and interest affect the amount paid

Delay cuts both ways. Interest may be added to the benefit under the policy or state law, and once the money is in a court registry it earns interest there, less a registry fee. On the other hand, every month of dispute can add legal fees, and if the insurer is allowed fees from the fund, the claimants share that cost. See discharge, fees and interest and attorney’s fees in interpleader.

The claim

A beneficiary normally starts by submitting a claimant’s statement and a certified death certificate. Courts’ summaries of claim files show the same pieces, for example “a completed Claimant’s Statement, Death Certificate” sent to the insurer within two months of a death.³ The insurer then checks the beneficiary designation on file, the status of the policy and any restrictions, such as assignments to a funeral home.

The contestability period. Life insurance policies generally become incontestable after a set period. New York, for example, requires individual life policies to provide that the policy “shall be incontestable after being in force during the life of the insured for a period of two years from its date of issue.”¹¹ If the insured died within that period, the insurer may review the application for misstatements before paying, which adds time even when no one else has claimed. That review concerns the insurer’s own liability, not who the beneficiary is, and it is separate from interpleader.

How a competing claim arises

A competing (or adverse) claim is any claim that conflicts with the beneficiary on record. Common sources include:

• A letter from another claimant or a lawyer. In the Washington case above, the insurer was notified by a lawyer for another claimant shortly after the named claimant submitted her claim.⁵ In the Ninth Circuit case, another claimant’s lawyer asked the insurer not to pay because the death was “being investigated by the police as a possible homicide.”⁴
• A slayer investigation. When a beneficiary is a suspect, insurers typically wait. See the slayer rule.
• Divorce. A divorce decree or a revocation-on-divorce statute may conflict with an old designation. See divorce.
• A late change of beneficiary. See change of beneficiary.
• Capacity or undue influence. In the first Tennessee case, the competing claimants argued the insured “was not of sound mind” when he signed the last form.¹ See undue influence and capacity.

The bar to make an insurer stop paying is low, and the bar to win is much higher. For why, see how a claim freezes payment. The Ninth Circuit has held that an insurer could interplead when it “had sufficient information in its possession to verify the existence of a colorable claim,” while noting this does not mean “a stakeholder never has a duty to investigate an adverse claim before interpleading.”⁴

Holding payment

Once a competing claim arrives, insurers usually hold the whole benefit, or the disputed part, until the claimants agree or a court decides. Some pay an undisputed portion. In American General v. D’Alfonso (C.D. Cal.), an online change in October 2024 split a $1,500,000 policy, 50% to the insured’s husband and 25% each to two other people. Two days before she died in December 2024, the insurer received a change form that the husband had signed as her attorney-in-fact, naming himself sole beneficiary. According to the insurer’s complaint, the power of attorney said nothing about changing beneficiaries, and the insurer wrote that it could not process the form. It paid the husband the 50% share and interpleaded the other half, which he and the two other beneficiaries each claimed. These are the insurer’s allegations, not findings.¹² See changes made under a power of attorney. Holding is a business decision driven by the risk of double liability; it is not a ruling on who is right.

State prompt-payment and interest statutes

States regulate how insurers handle claims and whether interest is owed on delayed death benefits. The rules vary widely by state, and federal programs and ERISA plans work differently. Examples:

• New York requires interest on life insurance death proceeds from the date of death. The statute does not require interest “for any period during which an insurer is required to pay interest under any state or federal law pertaining to interpleader.”¹³
• Florida requires lump-sum death proceeds to include interest from the date the insurer “receives written due proof of death.”¹⁴
• Texas provides that interest accrues on life insurance proceeds from the date the insurer receives due proof of loss until it accepts the claim and offers to pay.¹⁵

For more on interest before and after deposit, see discharge, fees and interest and the state comparison.

ERISA plans: the claims procedure

Life insurance provided through an employer is often governed by ERISA, and ERISA plans must follow a federal claims regulation:

• Initial decision. If a claim is denied, the plan must give notice within a reasonable time, but not later than 90 days after receiving the claim, extendable by up to 90 more days for special circumstances with written notice.¹⁶
• Appeal. Claimants must have at least 60 days after a denial to appeal, with the right to submit written comments and documents and to receive, on request and free of charge, copies of documents relevant to the claim.¹⁷
• Decision on appeal. Generally within 60 days after the appeal is received, extendable by up to 60 more days.¹⁸
• When the plan does not follow the rules. If a plan fails to establish or follow claims procedures consistent with the regulation, the claimant is deemed to have exhausted the plan’s remedies and may sue.¹⁹

Why exhaustion matters. The Supreme Court has noted that “the courts of appeals have uniformly required that participants exhaust internal review before bringing a claim for judicial review” under ERISA’s benefits provision.²⁰ A claimant who skips the plan’s appeal risks having a lawsuit dismissed or delayed. When the problem is a beneficiary dispute rather than a straightforward denial, a plan may interplead instead of deciding, but claimants should still respond to every plan deadline in writing.

When the stakeholder stops acting neutral

Claimants commonly report that, during the pre-interpleader stage, the insurer or its lawyer stops acting as a neutral holder and presses one claimant, often the one with the stronger claim, to settle or give up part of the benefit, for example by suggesting that a court fight will consume the money. Whether that happens in a particular case depends on the facts, and an insurer’s view of the merits is not a decision.

A request that a claimant withdraw or reduce a claim before the insurer will file, or before it will pay, is a warning sign. An interpleader does not depend on any claimant giving anything up: the stakeholder’s role is to deposit the money and let the court decide.

Interpleader presumes a disinterested stakeholder

Interpleader is designed for a holder that has no stake in who wins. Courts tie the stakeholder’s usual protections to that neutrality:

• Fees. The Fifth Circuit has said fees “are available when the interpleader is a disinterested stakeholder, and is not in substantial controversy with one of the claimants.”²¹ In the Eleventh Circuit, fees “are generally awarded, in the discretion of the court, to the plaintiff who initiates the interpleader as a mere disinterested stake holder.”²² The 1980 former Fifth Circuit decision that rule relies on, which binds the Eleventh Circuit,²³ adds that “the plaintiff who enters the conflict (by contesting the ownership of the fund or by disputing the correct amount of his liability) will not, in the absence of special circumstances, be awarded any expenses.”²⁴
• Discharge and related claims. The Third Circuit has held that a proper interpleader protects a stakeholder that “bears no blame for the existence of the ownership controversy” from counterclaims about its failure to resolve the dispute, while recognizing that a truly independent counterclaim against the stakeholder can proceed.²⁵ See what a discharge does.

State unfair claims practices laws

State insurance codes also regulate how claims are handled. Texas, for example, lists as unfair settlement practices, “with respect to a claim by an insured or beneficiary,” misrepresenting a material fact or policy provision, and “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement” of a claim on which “the insurer’s liability has become reasonably clear.”²⁶ California lists similar practices when committed knowingly or “with such frequency as to indicate a general business practice,” including “[n]ot attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.”²⁷ These laws differ by state in what they cover and who can enforce them. For benefits under an ERISA plan, many state-law claims are preempted; the Supreme Court held that ERISA preempted a plan participant’s state-law bad-faith claims in Pilot Life Ins. Co. v. Dedeaux.²⁸

What a claimant can do

• Ask for the insurer’s position in writing. Ask what competing claim it has received, what it believes the basis is, and what it intends to do.
• Do not withdraw a claim to get things moving. Withdrawing or reducing a claim is a decision about the merits, not a step the insurer needs to file an interpleader.
• Do not sign under an artificial deadline. A release or settlement is usually final. Get independent advice before signing, especially if the insurer’s own deadline is the main reason to sign now.
• Keep everything. Save letters, emails, notes of calls and the dates they happened.
• Remember who decides. If the dispute goes to court, the judge decides who is entitled to the money. The insurer’s view of who should win does not bind the court.

Options at this stage

• Settlement and release. Claimants can agree on how to divide the benefit and sign releases, and the insurer then pays as agreed. If a claimant is a minor or an incapacitated adult, the settlement usually needs a legal representative, and state law may require a court to approve it. In federal court, the judge must appoint a guardian ad litem or make another appropriate order for a minor or incompetent person who is unrepresented.²⁹ See guardian ad litem.
• A direct suit. A claimant can sue the insurer, or the plan under ERISA after using its claims procedure. See when a claimant sues first.
• Waiting for the interpleader. Waiting costs nothing upfront, but the timing is in the insurer’s hands. See how long a case takes.

Practical points

• Keep copies of everything you send and receive, and note the dates.
• Respond in writing, and keep your contact information current with the insurer.
• Do not sign a release, disclaimer or settlement without understanding what you are giving up.
• Watch for real deadlines: plan appeal windows under ERISA and, once a lawsuit is served, the deadline to answer.
• Do not ignore the letter just because its deadline is not a court deadline. It is often the best moment to settle.

Related guides

• How a claim freezes payment
• Named in an interpleader: what happens next
• How long does an interpleader case take?
• When a claimant sues first
• Discharge, fees and interest
• What is an interpleader action?

Footnotes

1. Metropolitan Life Ins. Co. v. Oswalt, No. 2:20-cv-02634-TLP-atc (W.D. Tenn. Jan. 29, 2021), ECF No. 47 (order denying motion to dismiss and granting motion to interplead funds). govinfo (PDF). ↩ ↩² ↩³

2. Unum Life Ins. Co. of America v. Tucker, No. 2:11-cv-02450-STA-cgc (W.D. Tenn. May 14, 2012), ECF No. 29. govinfo (PDF). ↩ ↩²

3. American General Life Ins. Co. v. Gibson, No. 2:13-cv-05069-NJB-SS (E.D. La. Jan. 21, 2015), Rec. Doc. 59. govinfo (PDF). The court was summarizing the insurer’s account of its correspondence. ↩ ↩²

4. Michelman v. Lincoln National Life Ins. Co., 685 F.3d 887 (9th Cir. 2012). govinfo (PDF). ↩ ↩² ↩³

5. Minnesota Life Ins. Co. v. Roberson, No. 2:18-cv-01058-RAJ (W.D. Wash. Aug. 2, 2019), ECF No. 31. Court order (PDF). ↩ ↩²

6. Turner v. McCray-Bey, No. 1:21-cv-02656-CCB (D. Md. Aug. 3, 2023), ECF No. 34. Court memorandum (PDF). Filing date from the public docket as indexed on CourtListener. ↩

7. Complaint for Interpleader, Shelter Life Ins. Co. v. O’Brien, No. 1:19-cv-03513-SKC (D. Colo. filed Dec. 12, 2019), ECF No. 1. These are the insurer’s allegations, described here only in general terms; the court made no findings about them. ↩

8. C.R.S. § 15-11-803(1)(b), (3), (7). Colorado General Assembly, Colorado Revised Statutes 2024, Title 15 (uncertified printout). See also the slayer rule. ↩

9. Order granting unopposed motion to deposit funds, O’Brien, ECF No. 33 (D. Colo. June 25, 2020) (text-only entry); notice of settlement, ECF No. 34 (July 7, 2020); minute order, ECF No. 36; judgment, ECF No. 37 (Sept. 16, 2020), court order (PDF). ↩

10. Jones v. Metropolitan Life Ins. Co., No. 2:24-cv-01967 (E.D. La.), Final Judgment, ECF No. 34, ¶¶ 1–5 (filed Jan. 13, 2025), court order (PDF); order granting motion to deposit, ECF No. 15 (Sept. 27, 2024). The pre-suit correspondence is described only in general terms. ↩

11. N.Y. Ins. Law § 3203(a)(3). NY Senate; FindLaw (unofficial). ↩

12. Complaint for Interpleader Relief ¶¶ 7–21, 28, American General Life Ins. Co. v. D’Alfonso, No. 2:25-cv-05584 (C.D. Cal. filed June 19, 2025), ECF No. 1, complaint (PDF). Allegations only. ↩

13. N.Y. Ins. Law § 3214(a)–(d). NY Senate; Justia (unofficial). ↩

14. Fla. Stat. § 627.4615. Florida Legislature. ↩

15. Tex. Ins. Code § 1103.104. Texas Constitution and Statutes. ↩

16. 29 C.F.R. § 2560.503-1(f)(1). Cornell LII. ↩

17. 29 C.F.R. § 2560.503-1(h)(2)(i)–(iii). Cornell LII. ↩

18. 29 C.F.R. § 2560.503-1(i)(1)(i). Cornell LII. ↩

19. 29 C.F.R. § 2560.503-1(l)(1). Cornell LII. ↩

20. Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99 (2013). Cornell LII. ↩

21. Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999). Caselaw Access Project. ↩

22. Prudential Ins. Co. of America v. Boyd, 781 F.2d 1494, 1497–98 (11th Cir. 1986). Caselaw Access Project. ↩

23. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc) (decisions of the former Fifth Circuit handed down before the close of business on September 30, 1981, are binding precedent in the Eleventh Circuit). Caselaw Access Project. ↩

24. Perkins State Bank v. Connolly, 632 F.2d 1306, 1311 (5th Cir. 1980), cited in Prudential Ins. Co. of America v. Boyd, 781 F.2d 1494, 1497 (11th Cir. 1986). Caselaw Access Project. ↩

25. Prudential Ins. Co. of America v. Hovis, 553 F.3d 258, 264–65 (3d Cir. 2009). Opinion (PDF). ↩

26. Tex. Ins. Code § 541.060(a)(1)–(2). Texas Constitution and Statutes; FindLaw (unofficial). ↩

27. Cal. Ins. Code § 790.03(h)(5). FindLaw (unofficial). ↩

28. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). Cornell LII. ↩

29. Fed. R. Civ. P. 17(c)(2). Cornell LII. ↩