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When a Claimant Sues First: Lawsuits That Become Interpleaders

Not every interpleader starts with the insurer. Often a beneficiary sues the insurer for the money, and the insurer responds by bringing in the rival claimants, depositing the funds and asking to be released. This guide explains how that conversion works, what happens to the claimant's own claims against the insurer, and what it means for someone deciding whether to sue first.

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On this page
  1. How a lawsuit becomes an interpleader
  2. Removal from state court
  3. What a discharge does to the claimant’s own claims against the insurer
  4. Examples
  5. What this means for a claimant who sues first
  6. Related guides

Most guides describe interpleader as something an insurer starts: it files a complaint, deposits the money and names everyone who has claimed it. Many cases begin the other way. A beneficiary who has not been paid sues the insurer or plan, sometimes in state court. The insurer then answers, names the rival claimants and asks the court to take the money and decide who gets it. The lawsuit the beneficiary started becomes an interpleader.

How a lawsuit becomes an interpleader

Federal Rule of Civil Procedure 22 provides the tool. Its first part lets a plaintiff join claimants whose claims “may expose a plaintiff to double or multiple liability.” Its second part is the one that matters here: “A defendant exposed to similar liability may seek interpleader through a crossclaim or counterclaim.”1 An insurer sued by one claimant can therefore counterclaim for interpleader against that claimant and bring in the others.

The rival claimants are not yet parties, so the insurer has to add them. Rule 13(h) says that “Rules 19 and 20 govern the addition of a person as a party to a counterclaim or crossclaim.”2 Rule 20 allows defendants to be joined when claims against them arise from the same transaction and share a common question, and Rule 19 requires joinder of people without whom the court “cannot accord complete relief.”3

In practice, insurers often call the pleading a “counterclaim and third-party complaint” in interpleader, and the people brought in appear as third-party defendants. Rule 14, the third-party rule, is written for a different situation. It lets a defendant sue “a nonparty who is or may be liable to it for all or part of the claim against it.”4 A rival beneficiary is not liable to the insurer in that sense, so the more natural route is a counterclaim with parties added under Rule 13(h). The label rarely changes the result, since either way the court ends up with the fund and all the claimants.

Statute or rule. The interpleader statute, 28 U.S.C. § 1335, is a separate route. It requires only $500 in controversy and two or more “adverse claimants, of diverse citizenship,” and the stakeholder must deposit the money or post a bond. A companion statute, § 2361, lets the court stop claimants from suing elsewhere and “discharge the plaintiff from further liability.”5 Rule 22 has no deposit requirement of its own but needs an independent basis for federal jurisdiction, such as an ERISA claim or ordinary diversity between the insurer and the claimants. See statutory vs. Rule 22 interpleader. Insurers do not always say which they rely on. In Lee v. West Coast Life, the Ninth Circuit noted that the insurer’s counterclaim “does not specify whether it is premised on rule or statutory interpleader,” and found the statutory requirements met.6

Removal from state court

A beneficiary who sues in state court may not stay there. A defendant may remove “any civil action brought in a State court of which the district courts of the United States have original jurisdiction,” generally within 30 days after receiving the complaint.7 A case removed only on diversity cannot be removed if a properly joined and served defendant is a citizen of the state where it was filed.8 Once in federal court, the insurer can counterclaim for interpleader there.

Lee followed that path. The beneficiaries sued the insurer in Los Angeles Superior Court for breach of contract and breach of the covenant of good faith and fair dealing. The insurer removed on diversity, answered with a counterclaim in interpleader, deposited the policy proceeds and added two rival claimants as counter-defendants.6

ERISA claims. A claim for benefits under an employer plan governed by ERISA is generally removable even if pleaded under state law. The Supreme Court held in Aetna Health v. Davila that where a person could have sued under ERISA § 502(a)(1)(B) “and where there is no other independent legal duty that is implicated by a defendant’s actions,” the claim is “completely pre-empted” and removable.9 The same test can cut the other way. A state probate claim to recover ERISA life insurance and stock benefits from the person who had been paid was remanded to state court because, as a later federal order recounted, it arose “out of independent legal duties completely unrelated to ERISA.”10 See ERISA post-distribution claims.

What a discharge does to the claimant’s own claims against the insurer

A claimant who sues first often pleads more than a claim for the benefit, such as bad faith, negligence or statutory penalties for late payment. When the insurer converts the case to an interpleader and asks for a discharge, the question is whether those claims survive.

The general rule is that interpleader protects the stakeholder against claims to the fund, not against every claim. Federal appeals courts have drawn the line differently:

  • Ninth Circuit: independent claims survive. In Lee, the court held that interpleader does not “shield a negligent stakeholder from tort liability for its creation of a conflict over entitlement to the interpleaded funds.” Where the stakeholder “may be independently liable to one or more claimants, interpleader does not shield the stakeholder from tort liability, nor from liability in excess of the stake.” The claimants could seek “all damages directly and proximately caused” by the insurer’s negligence, and the court reversed a ruling that had cut off their claim for fees as damages.6 See the decision summary.
  • Third Circuit: related claims against a blameless insurer do not. In Prudential v. Hovis, a claimant counterclaimed for breach of contract, negligence, breach of fiduciary duty, bad faith and unfair trade practices over the insurer’s handling of policy changes. The court held that a properly brought interpleader can shield the stakeholder from such counterclaims “where the stakeholder bears no blame for the existence of the ownership controversy and the counterclaims are directly related to the stakeholder’s failure to resolve the underlying dispute in favor of one of the claimants.” It also recognized that under the modern approach, a stakeholder facing a truly independent counterclaim stays in the case to defend it rather than being dismissed.11
  • Eighth Circuit: an insurer that created the conflict. In a case from Arkansas, the Eighth Circuit held that an insurer that acted unfairly to create the conflict cannot use interpleader as a shield against counterclaims blaming it for that conflict.
  • ERISA plans: state-law claims may be preempted. In Hartford Life v. Jones-Atchison, minor children intervened in an ERISA interpleader and counterclaimed against the insurer under state law and ERISA. The district court held the state-law claims preempted and dismissed the ERISA claim, and the Tenth Circuit affirmed on the ERISA claim, which was the only one appealed.12

The practical question is therefore whether the claim depends only on who should be paid, or on something the insurer did that would have caused harm regardless. A claim that the insurer simply did not pay while the dispute was pending is the kind interpleader is meant to end. A claim that the insurer’s own mistake created the dispute is more likely to survive, at least in the Ninth Circuit.

Examples

Estate of Budinski v. AAA Life: a claimant’s suit converted by counterclaim

A Michigan federal case shows the conversion step by step. An estate claimed an annuity death benefit that named the decedent’s daughter as beneficiary, and on April 3, 2025, it sued the insurer for a declaratory judgment. The complaint said, in the alternative, that the estate would consent to the insurer “converting this case to an interpleader matter,” in the court’s words. On May 19, 2025, the insurer answered and filed a “Counterclaim and Third-Party Complaint in Interpleader” naming both the estate and the daughter. The daughter, served by publication, never appeared. On June 23, 2026, the court entered default judgment against her, held that the insurer had properly invoked Rule 22 interpleader, approved an agreed fee, and discharged the insurer once it deposited the benefit. On August 21, 2026, on the estate’s unopposed motion, the court ordered the fund paid to the estate and dismissed the case.13

United of Omaha v. Black

Public docket indexes list this Florida federal case under the named beneficiary’s name as plaintiff. By the time of the court’s January 2026 order, the insurer “successfully interpleaded” the disputed proceeds, and the insured’s mother was pursuing a crossclaim against the named beneficiary. The court granted the beneficiary judgment on the pleadings on the challenges to her designation, and it asked for briefing on whether the mother’s unjust enrichment claim should be decided in the same case before the money was paid out.14 See the full discussion.

Jones v. MetLife (E.D. La. 2024)

A Louisiana case shows a claimant’s suit becoming an interpleader after removal, and what happened to the ERISA framework the court first applied. In July 2024 a claimant to an employer-sponsored group life benefit sued the insurer in Louisiana state court. The insurer removed the case to federal court on August 8, 2024. On or about September 5, 2024, it answered and asserted interpleader claims against two competing claimants and a funeral home.15

On September 27, 2024, the court granted the insurer’s motion to deposit the benefit it admitted was owed. The order barred the claimants from suing the insurer over the benefit while the case was pending, provided that the insurer’s liability for the deposited amount ended once the deposit was made, and reserved the insurer’s request for fees from the deposit.16

On December 3, 2024, the court issued an ERISA case management order. That order treated the case as “an action seeking benefits under the provisions of an employee benefit plan,” required a copy of “the complete administrative record concerning Plaintiff’s claim for benefits,” and limited discovery.17 Nine days later, on December 13, 2024, the court withdrew it:

“At least two of the parties have objected to the ERISA Case Management Order issued by the Court. R. Doc. 28. The Court finds the objection has merit.”

The order was “withdrawn and vacated,” and the court’s case manager was to “notice a scheduling conference to select new trial and related dates.”18 The order gave no further reasons. It does not say that ERISA’s administrative-record rules can never apply in an interpleader, only that in this case the court sustained the objection and set the case on an ordinary schedule.

The claimants then settled. On January 7, 2025, the court entered a 60-day conditional dismissal and retained jurisdiction to enforce the settlement.19 On January 13, 2025, it entered a final judgment on the parties’ joint motion that disbursed the deposit according to their settlement, permanently enjoined claims against the insurer, the employer and the plan, and dismissed the case with prejudice.15 For the plan-claim side of this, see ERISA and interpleader.

MetLife v. Lawless: state cases filed first did not stop the federal interpleader

In a New Jersey case, claimants had already begun probate and family-court proceedings over a decedent’s life insurance before the insurer filed a federal interpleader, and they asked the federal court to stay it. The court refused, holding that the probate case was not parallel because “the unavailability of interpleader relief in state court is of sufficient magnitude to prevent the Court from finding this action parallel to the Probate Action,” and that a stay would “deprive MetLife of access to expeditious interpleader relief as provided for by Congress.”20 See interpleader in state court.

Guerrero v. Northwestern Mutual: a beneficiary’s declaratory suit

Sometimes the beneficiary of record sues before the insurer can interplead. In Guerrero v. Northwestern Mutual Life Ins. Co., No. 1:23-cv-01962-CNS-MDB (D. Colo.), the beneficiary of record filed a declaratory-judgment suit against the insurer on August 1, 2023, after the insurer had flagged a competing claim and said it might interplead. The case was voluntarily dismissed with prejudice under Fed. R. Civ. P. 41(a)(1)(A)(i) on October 4, 2023, about two months after filing, without a ruling.21

Wilty v. Prudential: reaching money already paid

Wilty v. Prudential Ins. Co. of America (W.D. Tenn.)

  • W.D. Tenn. No. 2:18-cv-02602-JTF
  • 2018–2021
  • ERISA; slayer statutes; funds already paid
  • Later settled
How it began
Five claimants to the benefit filed an ERISA suit against the insurer in federal court in August 2018. The insurer had already paid the death benefit to the insured's widow. The insurer answered with a counterclaim and third-party complaint, bringing in the widow, other potential claimants and the insured's minor daughter, identified as K.W.
The TRO
The insurer moved for a temporary restraining order. After a hearing, the court found that the insurer was likely to succeed on its claim for a constructive trust over the sums paid to the widow. It noted the plaintiffs' allegation that she might be liable for the insured's death, and that investigators had not ruled her out as a suspect. A finding that she willfully or intentionally caused or procured the death "would almost certainly prevent her from retaining or recovering" the funds under the slayer statutes, and the court cited those of Tennessee, Mississippi and New Jersey. It found irreparable harm because evidence showed she had already withdrawn a substantial portion of the money after being asked not to. The court froze any ascertainable funds paid to her until October 9, 2018.
Funds returned and deposited
In a November 2018 consent order, the court allowed the insurer to freeze the $197,038.45 remaining in the widow's account and ordered her to return $325,000 of the death benefit within five days. The parties were to seek leave to deposit both sums in the court's registry. The insurer's request for a preliminary injunction over the rest was withdrawn without prejudice until it was decided whether a slayer rule applied. The widow agreed that spending the money would not be a defense and that a money judgment could be entered against her, and she had to account for how the benefit had been spent.
The stay
In April 2019, according to a later order, the court "decided to stay the case due to a Plaintiff facing criminal charges" and said it would resume once the criminal case had been decided. In September 2021 it directed the plaintiffs' counsel to report on the outcome of the criminal charges. News reports say the widow was arrested and charged in the death in March 2019.
The minor
The minor daughter was a third-party defendant. In November 2021, a Mississippi chancery court that had appointed a conservator for her authorized counsel to represent the conservator and her guardian ad litem in the federal case and to move her share from the federal registry to the chancery court.
Outcome
The parties settled, so no court decided the slayer question. On November 19, 2021, the court granted the parties' joint motion for a consent order. It appointed a guardian ad litem for the minor, who reported to the court that the settlement was in her best interests. The order recorded that the widow waived and released any claim to the death benefit, directed the clerk to distribute the registry funds between the remaining claimants, discharged the insurer and permanently enjoined claims against it, and dismissed the case with prejudice. A judgment entered on that order was filed on December 1, 2021.

Court copies: TRO order, Sept. 25, 2018, ECF No. 29 (PDF); consent order approving settlement, Nov. 19, 2021, ECF No. 55 (PDF); judgment, filed Dec. 1, 2021, ECF No. 56 (PDF).

Sources:2223242526272829

Wilty shows a use of the converted case that is easy to miss. The insurer was not only protecting itself against paying twice. Because it had already paid, it used its counterclaim to seek equitable relief against the person it paid, recovered most of the money into the registry, and left the claimants to resolve who was entitled to it. Equitable restitution of this kind generally requires an identifiable fund. The Sixth Circuit, which the Wilty order cited, describes a constructive trust as a remedy on “particular funds or property in the defendant’s possession,” as opposed to a general money judgment.30 Speed mattered, because money that has been spent may not be traceable. For how a slayer claim works once the money is in court, see the slayer rule. For claims against a beneficiary after an ERISA plan has paid, see ERISA post-distribution claims.

What this means for a claimant who sues first

  • Expect the case to change shape. Suing the insurer often leads to an interpleader counterclaim. The case then becomes mainly a dispute with the other claimants, and the insurer will usually ask to deposit the money and be dismissed. See named in an interpleader.
  • The forum may change. A state-court suit may be removed within the federal deadlines, and an ERISA benefits claim generally can be. A state-law claim against the person who was paid is treated differently.
  • Plead claims against the insurer carefully. Claims that depend only on who should have been paid are likely to end with a discharge. Claims based on the insurer’s own conduct before the dispute, such as negligence that created the conflict, may survive in some circuits but not others.
  • Fees can come out of the fund. A discharged stakeholder often asks for fees from the deposit. See discharge, fees and interest.
  • Check the scheduling order. A suit for plan benefits may first be put on an ERISA track built for review of the plan’s administrative record. Once the case becomes a dispute between claimants, that track may not fit, and in Jones v. MetLife the court vacated its ERISA order after parties objected.
  • If the money was already paid, act quickly. As Wilty shows, freezing and tracing funds early can matter more than the eventual ruling.

Footnotes

  1. Fed. R. Civ. P. 22(a)(1)–(2), (b). Cornell LII. ↩

  2. Fed. R. Civ. P. 13(h). Cornell LII. ↩

  3. Fed. R. Civ. P. 19(a)(1), 20(a)(2). Cornell LII (Rule 19); Cornell LII (Rule 20). ↩

  4. Fed. R. Civ. P. 14(a)(1). Cornell LII. ↩

  5. 28 U.S.C. § 1335(a); 28 U.S.C. § 2361. Cornell LII (§ 1335); Cornell LII (§ 2361). ↩

  6. Lee v. West Coast Life Ins. Co., 688 F.3d 1004 (9th Cir. 2012), including n.1. Opinion (PDF) (also on the Caselaw Access Project). ↩ ↩2 ↩3

  7. 28 U.S.C. §§ 1441(a), 1446(b)(1). Cornell LII (§ 1441); Cornell LII (§ 1446). ↩

  8. 28 U.S.C. § 1441(b)(2). ↩

  9. Aetna Health Inc. v. Davila, 542 U.S. 200 (2004). Cornell LII. ↩

  10. Hohu v. Hatch, 940 F. Supp. 2d 1161 (N.D. Cal. 2013) (dismissing a later federal suit and describing the earlier remand order). Court order (RECAP copy). ↩

  11. Prudential Ins. Co. of America v. Hovis, 553 F.3d 258 (3d Cir. 2009). Caselaw Access Project. ↩

  12. Hartford Life & Accident Ins. Co. v. Jones-Atchison, No. 20-6135 (10th Cir. Sept. 20, 2021) (unpublished). govinfo (PDF). ↩

  13. Amended Order, Estate of Budinski v. AAA Life Ins. Co., No. 2:25-cv-10964-TGB-EAS (E.D. Mich. June 23, 2026), ECF No. 24, at 3, 6–10, 13–14, court order (PDF). Order Granting Unopposed Motion for Interpleader Disbursement, ECF No. 25 (Aug. 21, 2026). See also the full summary. ↩

  14. United of Omaha Life Ins. Co. v. Black, No. 4:25-cv-168-AW-MAF (N.D. Fla. Jan. 23, 2026), ECF No. 44. Court order (PDF). The case appears as Black v. Anderson on CourtListener’s docket index. ↩

  15. Final judgment, Jones, ECF No. 34, ¶¶ 1–5 (E.D. La. filed Jan. 13, 2025). Court judgment (PDF). ↩ ↩2

  16. Order granting ex parte motion to deposit admitted liability, Jones v. Metropolitan Life Ins. Co., No. 2:24-cv-01967 (E.D. La. Sept. 27, 2024), ECF No. 15.. ↩

  17. ERISA case management order, Jones, ECF No. 26 (E.D. La. Dec. 3, 2024). ↩

  18. Order, Jones, ECF No. 29 (E.D. La. Dec. 13, 2024).. ↩

  19. Order of dismissal, Jones, ECF No. 31 (E.D. La. Jan. 7, 2025).. ↩

  20. Metropolitan Life Ins. Co. v. Lawless, No. 3:19-cv-13688-MAS-ZNQ (D.N.J. Nov. 15, 2019), ECF No. 39 (memorandum opinion and order denying stay), at 2, 14. ↩

  21. Guerrero v. Northwestern Mut. Life Ins. Co., No. 1:23-cv-01962-CNS-MDB (D. Colo.), complaint filed Aug. 1, 2023; notice of voluntary dismissal with prejudice, Oct. 4, 2023. Dates from the public docket. ↩

  22. Wilty v. Prudential Ins. Co. of America, No. 2:18-cv-02602-JTF (W.D. Tenn.), docket. CourtListener (unofficial). ↩

  23. Order granting motion for temporary restraining order, Wilty, ECF No. 29 (W.D. Tenn. Sept. 25, 2018). Court order (PDF). ↩

  24. Consent order, Wilty, ECF No. 41 (W.D. Tenn. Nov. 7, 2018).. ↩

  25. Order directing plaintiffs’ counsel to file status report, Wilty, ECF No. 51 (W.D. Tenn. Sept. 22, 2021).. ↩

  26. WREG, “One year later, Olive Branch woman charged with murder after man found dead in street” (Mar. 2019). WREG. A charge is an accusation, not a finding. ↩

  27. Order appointing counsel for ward, Chancery Court of DeSoto County, Mississippi (Nov. 5, 2021), filed in Wilty as ECF No. 53-1.. ↩

  28. Order granting joint motion for entry of consent order appointing guardian ad litem and approving settlement, Wilty, ECF No. 55 (W.D. Tenn. Nov. 19, 2021), ¶¶ 1–8. Court order (PDF). ↩

  29. Judgment, Wilty, ECF No. 56 (W.D. Tenn., approved Nov. 19, 2021, filed Dec. 1, 2021). Court judgment (PDF). ↩

  30. Central States, Southeast & Southwest Areas Health & Welfare Fund v. First Agency, Inc., 756 F.3d 954 (6th Cir. 2014). Caselaw Access Project. ↩