Frequently Asked Questions About Interpleader

What is an interpleader?

It is a lawsuit filed by someone holding money or property, such as an insurer, plan, bank, or escrow agent, who faces competing claims. The holder asks a court to decide who is entitled, and usually deposits the money with the court. See what is an interpleader action?

Why would an insurer sue me? I didn’t do anything wrong.

Being named does not necessarily mean you are accused of wrongdoing. The insurer is usually saying only that more than one person claims the money and it should not have to pick. You are named so that you can make your claim and be bound by the result.

I’ve been served. What should I do first?

Note the answer deadline, read the complaint, and file a response on time. In federal court, the answer is generally due 21 days after service. State deadlines differ. If you do not respond, the court can enter a default, which can mean losing your claim. See named in an interpleader.

Do I need a lawyer?

Individuals may represent themselves in federal court, and many people do. But interpleader cases can turn on complex law, and the other side may have a lawyer. The guide on handling an interpleader without a lawyer explains the rules, the risks, and where to find free or low-cost help. To talk with an attorney who has interpleader experience, see working with an interpleader attorney.

Why hasn’t the insurance company paid yet?

A competing claim, a court order, or an unresolved legal question (such as the slayer rule or a divorce) can lead the company to hold payment. See how a claim freezes payment.

Can someone just file a claim to block payment to me?

The short answer is yes. A competing claim can delay or block payment, and the stakeholder may then interplead. Keep in mind that these allegations still have to be proven in court, but blocking payment is not particularly difficult. See how a claim freezes payment.

My ex-spouse is still the named beneficiary. Who gets the money?

It depends on the type of policy or plan and the state. Some states revoke a former spouse’s designation on divorce, but federal law often requires payment to the named beneficiary for employer plans, federal employee coverage, and military coverage. See divorce and beneficiary designations.

Does a will override a beneficiary form?

Usually not. A beneficiary designation is generally changed only through the method the policy or plan requires. There are exceptions, including some state rules for securities accounts. See change of beneficiary.

Who pays the insurer’s lawyer?

Courts often allow a disinterested stakeholder to recover reasonable fees and costs from the fund, which reduces what the winning claimant receives. Courts have discretion and may deny or limit fees. See discharge, fees, and interest.

Do I get interest on the money?

Sometimes. It depends on the court’s orders, whether the money was deposited in an interest-bearing account, and state laws on interest on insurance proceeds. See discharge, fees, and interest.

How long does an interpleader take?

There is no standard length. A case where the claimants agree can end quickly with a stipulated order. A contested case with discovery and a trial can take much longer.

Can we settle?

Yes. If all claimants can agree on how to divide the fund, they can ask the court to enter an order distributing it. The court usually must authorize disbursement before the clerk pays the money out, and extra steps may apply if a minor is involved.

Is this site legal advice?

No. It is general information. Laws change and differ by state, and your situation may involve facts that change the answer. See the disclaimer, and the privacy notice for what the site does and does not collect.