State law
Indiana: Beneficiary Disputes and Interpleader Under Indiana Law
Indiana handles a beneficiary who causes the insured's death through a constructive trust rather than a revocation. In the Southern District, a telephone change of beneficiary was enough of a dispute to justify interpleader, and the new beneficiary's suit against the insurer was dismissed.
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A constructive trust, not a revocation
Many states treat a beneficiary who kills the insured as if that person had died first. Indiana’s statute works differently: it makes the wrongdoer a trustee of what they receive. Under Ind. Code § 29-1-2-12.1, “A culpable person is a constructive trustee of any property that is acquired by the culpable person or that the culpable person is entitled to receive as a result of an unlawful death,” expressly including life insurance proceeds on the decedent’s life where the culpable person is a beneficiary.1
Key points of the statute:1
- Who is culpable. A person found guilty of causing an unlawful death, or “A person who is determined by a preponderance of the evidence in a civil action to have knowingly or intentionally caused an unlawful death,” or that person’s estate.
- What counts. “Unlawful death” includes a death resulting from murder or voluntary manslaughter, among other listed offenses.
- Effect of a conviction. “A judgment of conviction is conclusive in a subsequent civil action.”
- Where the money goes. The trust property goes to those legally entitled to it, “determined as if the constructive trustee had died immediately before the decedent.”
- If the culpable person dies. Life insurance proceeds may be paid as if the culpable person had predeceased the decedent.
In Farmers New World Life v. Gathright (N.D. Ind. 2019), the insurer interpleaded and cited this statute. The accused beneficiary then defaulted, so no court applied the statute. The summary is in the decisions library.
Changes that skip the paperwork
Indiana law requires “substantial compliance” with a policy’s change-of-beneficiary requirements, as the court in Cyranek described an Indiana Court of Appeals decision.2 USAA Life v. Cyranek shows the kind of dispute that produces. The insured’s first husband was the original beneficiary of a $250,000 term policy. After their divorce, she telephoned the insurer and named the man she was about to marry, and the insurer confirmed the change in writing the same day. She died a few months later. The first husband argued that the policy required a written change, so he was still the beneficiary.2
The court did not decide who was right. It held only that interpleader was proper:
- “Interpleader is justified only when the stakeholder has a real and reasonable fear of double liability or conflicting claims,” but the competing claim needs only a “minimal threshold level of substantiality.”
- “It is not our role at this point in these proceedings to assess or resolve the merits of these conflicting claims in order to find interpleader appropriate.”
- “The facts before us are sufficient to establish a real and reasonable fear on the part of USAA Life of conflicting claims, regardless of whether it may believe one claim is more legitimate than the other.”2
The new husband had counterclaimed against the insurer for breach of contract, promissory estoppel and intentional infliction of emotional distress. The court dismissed those claims without prejudice: “Having determined USAA Life’s interpleader action to be proper, it cannot be liable for failing to distribute the interpleaded funds.” It left room for a claim “truly independent of who was entitled to the life insurance proceeds,” such as misconduct apart from the decision to interplead.2 See named in an interpleader.
Decision
USAA Life Ins. Co. v. Cyranek (S.D. Ind. 2020)
- Facts
- The insured changed the beneficiary of a $250,000 policy from her former husband to her soon-to-be husband by telephone. After her death, the former husband dropped a related state court claim but signaled that he would pursue the proceeds elsewhere, arguing that the policy required a written change.
- Holding
- Statutory interpleader under 28 U.S.C. § 1335 was proper, and the insurer was ordered to deposit the $250,000 plus interest. The new husband's counterclaims, all based on the insurer's failure to pay him, were dismissed without prejudice.
- Why it matters
- An insurer does not have to judge the merits of a competing claim before interpleading, and a beneficiary generally cannot sue it simply for interpleading instead of paying.
Opinion: GovInfo.
Elsewhere on this site
- Transamerica v. Lyphout (N.D. Ind.), a dispute between an earlier claim form and later confirmed designations on an annuity that ended in an agreed judgment, is discussed in change of beneficiary disputes.
Related guides
- State law differences
- Slayer rule
- Change of beneficiary disputes
- Federal programs
- Attorney’s fees in interpleader