After a loved one passes away, there may be a dispute about who is the proper beneficiary of his or her life insurance policy. The dispute frequently involves family members, former spouses, or other persons with a relationship to the insured.
These can be hotly-contested cases that bring up strong emotions among the parties. We have experience representing persons in these cases both as named and unnamed beneficiaries.
Often these cases end up in court when the insurance company files what is called an interpleader action. In this type of case, the insurance company deposits the death benefit in court and then ultimately gets dismissed from the case so that those claiming beneficiary status can litigate against one another. Insurance companies are often quick to file interpleaders when there is an indication that they face competing claims for the death benefit. They seek to avoid a situation where they pay the funds to one person and then later are sued by another claimant—facing the possibility of paying the same policy twice. They do this by filing interpleader actions that name all potential claimants as defendants.
Since interpleader actions are frequently filed in federal court, it is important to have a lawyer who is accustomed to its practices and procedures. We have litigated many of these cases in federal court.
For an interpleader action to be filed in federal court, the relevant statute, 28 U.S.C. § 1335, requires that (1) two or more claimants for the policy reside in different states, and (2) the insurance company has deposited the death benefit into the court registry. Otherwise, if the claimants all reside in the same state, the insurance company must file the action in state court.
There are important factors and considerations in interpleader cases that lawyers who do not litigate life insurance cases may not be aware of. For instance, New York and New Jersey have enacted laws that prevent a divorced spouse from receiving the death benefit, if named as the beneficiary prior to the date of divorce, unless certain conditions are met. Thus, simply because an ex-spouse is named as beneficiary, it does not mean that he or she is entitled to receive the death benefit.
It may also be significant if the policy was obtained through employment and governed by ERISA, which is a federal law, or if it was purchased in the private insurance market and is subject to state law. These different laws may lead to a different determination of who is the proper beneficiary.
Other issues that often arise is whether the beneficiary designation was validly made. There are cases where the insured made a beneficiary change when not of sound mind, when under the undue influence of another person, or when under duress. In addition, some beneficiary changes may be the result of forgery. Under these circumstances, the named beneficiary may not be allowed to recover the death benefit.
On some occasions, the beneficiary is a suspect in the insured’s death. In virtually all states, there exist what are called “Slayer Statutes” that legally prohibit a person responsible for the intentional killing of a life insurance policyholder from recovering the death benefit. In these cases, the claimants for the policy must litigate the issue of whether the beneficiary killed the insured—mirroring what happens in a criminal case, but subject to a lesser standard of “preponderance of the evidence” used in civil case as opposed to “beyond a reasonable doubt.”
If you are involved in a beneficiary dispute for a life insurance policy, you can call the Law Offices of Eric Dinnocenzo at (212) 933-1675 for a free consultation.