Minor and Beneficiary Disputes
and the Role of Interpleaders
Patricia J. Austin
Axis Specialty U.S. Services
1 University Square Drive, Suite 200
Princeton, NJ 08540
(609) 375-9151
[email protected]
Joseph M. Hamilton
Mirick O’Connell
100 Front Street
Worcester, MA 01608-1477
(508) 791-8500
[email protected]
Patricia J. Austin is vice president and senior legal counsel for AXIS Accident &
Health located in Princeton, New Jersey. She serves as the division’s sole in-house
counsel and provides guidance on a variety of legal issues related to accident and
health insurance products. Patricia graduated from Vassar College and received her
J. D. from Syracuse University College of Law.
Joseph M. Hamilton is a Partner at Mirick O’Connell and Chair of the Firm’s
Litigation Group as well as the Life, Health, Disability and ERISA Litigation Group.
He concentrates his practice in the defense of insurers and self-insureds at all
levels of state and federal courts. He has been named a “Super Lawyer” by Boston
Magazine and Law & Politics every year since 2008, and holds leadership positions
with both DRI and the American Bar Association.
Minor and Beneficiary Disputes and
the Role of Interpleaders
Table of Contents
I.Introduction..................................................................................................................................................97
II. Beneficiary Disputes.....................................................................................................................................97
A. Beneficiary’s Killing of the Insured......................................................................................................97
1. Slayer Statute/Rule.........................................................................................................................97
2. Payment of Proceeds......................................................................................................................98
B. Death of the Insured and Beneficiary and the Uniform Simultaneous Death Act..........................100
III.Interpleader.................................................................................................................................................100
A.Jurisdiction..........................................................................................................................................101
1. Rule Interpleader.........................................................................................................................101
2. Statutory Interpleader.................................................................................................................101
B.Venue....................................................................................................................................................102
1. Rule Interpleader.........................................................................................................................102
2. Statutory Interpleader.................................................................................................................102
C. Minor Claimants..................................................................................................................................102
D. Interpleader Under ERISA..................................................................................................................103
E. Avoiding Litigation..............................................................................................................................105
IV.Conclusion...................................................................................................................................................105
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 95
Minor and Beneficiary Disputes and the Role of Interpleaders
I.Introduction
An insurer’s payment of a life insurance benefit to a person not entitled to the funds in almost all
cases does not relieve the insurer of liability of payment to the proper beneficiary. Thus, when faced with competing claims to a life insurance benefit, or, in a situation in which the proper beneficiary is unclear, the law
provides a vehicle by which the insurer can have a judicial determination made of the appropriate beneficiary
along with protection to the insurer from multiple liability. This paper addresses some of the scenarios in
which competing claims or uncertain beneficiaries arise and discusses the vehicle—interpleader—which the
insurer may use to address the issue.
II. Beneficiary Disputes
A. Beneficiary’s Killing of the Insured
One area of beneficiary disputes is where the insured is murdered, or in some other way intentionally
killed as a result of the acts of the beneficiary. In such a case, the law prohibits that beneficiary from profiting
from his or her conduct. This is based on long-standing public policy that aims to avoid creating any incentive
for the death of the insured.
The prohibition preventing the beneficiary from obtaining the life insurance benefit exists in all jurisdictions either by statute, common law, or a combination of the two. The life insurance policy may also contain an exclusion for such conduct. However, the burden is upon the insurer, or upon the person who seeks to
prevent the beneficiary from receiving the life insurance benefit, to prove that the beneficiary murdered the
insured. Rottmund v. Cont’l Assurance Co., 761 F.Supp. 1203 (E.D.Pa. 1990).
1. Slayer Statute/Rule
Many states have enacted what is called a “Slayer Statute,” designed to supplement or replace the
common law doctrine that prevents the beneficiary from profiting from their involvement in the killing of the
beneficiary. The only states which have not passed a statute are Maryland, Missouri, New Hampshire, New
York, and Vermont. Those states, however, rely on a body of common law. See, e.g., Johnson v. Heb, 729 F.Supp.
1524 (D.Md. 1990); Webb. v. Voirol, 773 F.2d 208 (8th Cir. 1985)(applying Missouri law); Conn. Gen. Law Ins.
Co. v. Coal, 821 F.Supp. 193 (S.D.N.Y. 1993). Where a jurisdiction relies on common law, it is known as the
“Slayer’s Rule.”
The language of the statute may vary in describing the level of proof. For instance, to the extent the
Slayer Statute ties the wrongdoing to a criminal act, whether the beneficiary committed the act may be determined by the criminal standard of proof required for such convictions, beyond a reasonable doubt.
Under the common law, the challenging party typically must demonstrate that the beneficiary was
responsible for the death of the insured by a preponderance of the evidence. See, e.g., Cont’l Assurance Co. v.
Diorio-Volungis, 746 N.E. 2d 550 (Mass. 2001).
Some jurisdictions specifically include in their statute the fact that if the criminal conviction has
been obtained, the issue of the beneficiary’s entitlement to the insurance has been conclusively determined.
However, the converse does not apply. The failure to obtain a criminal conviction under the higher criminal standard of proof generally does not prevent a challenge to the beneficiary’s entitlement to the proceeds
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 97
through a civil action, applying the civil burden of proof--preponderance of the evidence. See McClure v.
McClure, 403 S.E. 2d 197 (W.Va. 1991).
2.Payment of Proceeds
When the beneficiary loses the right to the policy benefits, the question then arises of who receives
them. Most jurisdictions statutorily direct the payment of the proceeds. For a summary by jurisdiction of statutes that govern the distribution of insurance proceeds, see Cook v. Grierson, 845 A.2d 1231 (Md. 2004).
The statutes treat the slayer as either having predeceased the victim, simultaneously died with the
insured, or having disclaimed his share. In these circumstances, typically, the contingent beneficiary would be
entitled to the proceeds. If there is no contingent beneficiary, generally the benefits are paid into the insured’s
estate, or if no estate plan exists, to the insured’s heirs. This is frequently done through the vehicle of a constructive trust. Equity holds the slayer to be a constructive trustee for the heirs or next of kin of the insured.
The law views the property as being acquired in such circumstances that the holder of it may not in good conscience retain the beneficial interest.
Where no statute exists, the treatment by the courts has differed. While it is not uncommon for a policy to have a secondary beneficiary named, under normal circumstances that provision of the policy does not
come into play unless the primary beneficiary has died. Where a beneficiary has murdered the insured, however, the beneficiary is not dead, but rather has been found not to be entitled to the benefits due to the beneficiary’s actions.
Some courts have held to a literal reading of the policy and concluded that the contingent beneficiary
is not entitled to the policy proceeds. Most jurisdictions, for public policy reasons, through either statute or
common law, conclude that a contingent beneficiary should receive the proceeds. Monumental Life Ins. Co. v.
Lyons-Neder, 140 F.Supp.2d 1265 (M.D.Ala. 2001); Salak v. Protective Life Ins. Co., 19 F.Supp.2d 953 (S.D.Iowa
1998). The minority position is that the proceeds should be paid to the insured’s heirs or estate. Ahmed v.
Ahmed, 817 N.E.2d 424 (Ohio Ct. App. 2004); United Presidential Life Ins. Co. v. Moss, 838 P.2d 1011 (Ok. Ct.
App. 1992).
If there is no one other than the slayer who has a right to the insurance benefits, the death of the
insured can relieve the insurer of all liability under the policy. N.Y. Life Ins. Co. v. Henriksen, 415 N.E.2d 146,
149 (Ind. Ct. App. 1981).
In addition, where the policy was obtained by the beneficiary with the intent to murder the insured,
the policy has been held to be void ab initio thereby relieving the insurer of any liability under the policy. Fed.
Kemper Life Assurance Co. v. Eichwedel, 639 N.E.2d 246 (Il. App. Ct. 1994). Some jurisdictions provide this
remedy statutorily.
Insurers are generally relieved of further liability for making payment of the policy proceeds to the
slayer so long as it was not on notice that the beneficiary may be a slayer. If in doubt, the insurer may file an
interpleader action requesting the court to determine the appropriate beneficiary.
Children can also be impacted by the actions of their parents. In a case of first impression, the
Supreme Court of Rhode Island in Swain v. Estate of Tyre, 57 A.3d 283 (R.I. 2012) held that under the Rhode
Island Slayer Statute, contingent beneficiaries of a will, who were the children of the slayer, could not take the
inheritance because it would “benefit” their father. Swain was found, in a civil wrongful death action filed in
Rhode Island, to have caused his wife’s death while scuba diving in the British Virgin Islands. Swain was also
convicted of murder in the British Virgin Islands, but that conviction was later overturned. Because he was
found responsible for killing his wife, the Probate Court, applying the Rhode Island slayer statute, declared
that Swain would not receive anything from the estate of his wife.
98 ■ Life, Health, Disability and ERISA ■ April 2015
Swain had been named the sole beneficiary of his wife’s estate, and his children (the stepchildren of
the wife) were named the only contingent beneficiaries.
Rhode Island’s Slayer’s Statute states that it “shall be construed broadly in order to effect the policy of
the state that no person shall be allowed to profit by his or her own wrong.” The statute also states that neither
the “slayer nor any person claiming through him or her shall in any way acquire property or receive any benefit as the result of the death of the decedent ….” The court acknowledged that the children were not claiming through their father, the slayer, but rather were claiming as contingent beneficiaries because their father
was barred from inheriting the wife’s assets. The court also acknowledged that there was no specific language
in the statute precluding a slayer’s children from inheriting as named contingent beneficiaries. However, the
court held, despite this, the clear and unequivocal direction of the statute required the court to interpret it so
as to prevent the slayer from benefiting.
The key facts swaying the court were that both children had contributed and raised money to finance
the father’s criminal defense and both stated they would use any proceeds they inherited for their father’s continued defense. Thus, the court concluded that the father would “benefit” from his involvement in the death
of his wife if the children were allowed to inherit because they would use the money to finance their father’s
defense.
The court did acknowledge that there may be situations, such as a murder-suicide or where the children were estranged from the slayer, where it could be concluded that the slayer was not benefiting from the
estate. However, in this case, the court affirmed the judgment of the Superior Court which found the children
were barred from recovering from the estate.
Two of the judges of the court dissented, arguing that the majority construed the statute too broadly.
In Lee v. Aylward, 790 S.W. 2d 462 (Mo. 1990), a wife murdered her husband. The wife was named as
beneficiary in the husband’s life insurance policy. The contingent beneficiaries were their children. The husband’s estate argued that since the children of the slayer were named as contingent beneficiaries, the estate
should recover the proceeds. The Missouri Supreme Court, however, rejected the argument, stating that any
thought that the husband would exclude the children “if he had realized that their mother would kill him
introduced inappropriate speculation.” Id. at 463.
In the case of In re Estate of Michael Burklund, 2013 WL 327622 (E.D.Penn. 2013), the insured,
Michael Burklund, was murdered by his wife. Their son alleged that he was entitled to the proceeds of the life
insurance policy as the contingent beneficiary. The father’s estate challenged the distribution of the proceeds
under Pennsylvania’s Slayer Statute. The wife was the primary beneficiary.
At an injunction hearing, the son testified that his mother had agreed to disclaim her interest in the
death benefit after the son agreed to use the proceeds to pay for her defense. After the mother was convicted
of the father’s murder, the son submitted an affidavit stating he no longer intended to spend any of the insurance proceeds on his mother’s criminal defense.
The mother was precluded from receiving the insurance benefit under the Pennsylvania Slayer Statute. The estate claimed that the son should be disqualified due to his intent to circumvent the requirements
of the Slayer Statute by assisting in his mother’s defense. Despite this, the court held that the son was entitled
to the death benefit under the clear language of the ERISA plan documents. The court held that the son was
basing his claim as a contingent beneficiary of the plan and not “through the slayer” and therefore the benefit should be awarded to him. The court also held that despite the son’s original statement that he intended
to assist his mother, the fact that he submitted a subsequent affidavit stating that he no longer intended to use
the funds for his mother’s criminal defense was sufficient.
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 99
B. Death of the Insured and Beneficiary and the Uniform Simultaneous
Death Act
Occasionally, in the context of an accidental death for instance, both the insured and the primary
beneficiary may perish. Depending on the circumstances of the accident, the insurer may not be able to determine with any degree of certainty whether the beneficiary predeceased the insured. Given the challenges generated by this scenario, the Uniform Simultaneous Death Act (the “Act”) was promulgated in 1940. As stated
by the Uniform Law Commission:
The classic case involves a husband and wife who are killed in the same automobile accident.
The question is raised because the law generally puts property from the first to die into the estate
of the person who dies second. The unpalatable result of that determination is the fact that the
property of the first to die passes through two estates (and possibly two probates)--one for the
first to die and one for the second to die. Two probates are inevitably worse than one, considering the costs and delays inherent in that process. Better to transfer property directly to those
who truly survive a deceased individual.
. . .
The fundamental rule is simple. If it cannot be proved that one individual survived another by a
time period of 120 hours, by law that individual predeceases the other. The effect of the rule is to
make each individual predecease the other. If the husband and wife are killed together, for example, in that automobile accident, each predeceases the other by law. No property passes between
them at death. Their other heirs, devisors and/or beneficiaries will take their property, however
that transfer is arranged.
Twelve states (Arizona, Arkansas, Hawaii, Kansas, Kentucky, Massachusetts, New Mexico, North
Carolina, North Dakota, Ohio, South Dakota, and Virginia) as well as the District of Columbia and the Virgin
Islands have explicitly adopted the Act. A number of other states have indirectly adopted the Act as part of the
Uniform Probate Code. Thus, for example, if the wife is the insured, and both she and her husband die in the
same accident, for purposes of payment of the proceeds it will be assumed that she outlived her husband, and
the benefit is passed through the wife’s estate. However, if the wife had named a secondary beneficiary in her
policy, that person will receive the benefit.
The Act does not preclude proof of actual survivorship of the beneficiary after the insured is
deceased. It also does not supersede policy provisions based on the beneficiary surviving or predeceasing the
insured. The Act also does not apply if the insured provides for a different property distribution in a will or
contract. See, e.g., Osborn v. Insurance Co. of North America, 490 P.2d 726 (Utah 1971) (policy provided that
if there is no surviving beneficiary, proceeds shall be paid to the surviving children); Waldman v. Maini, 124
Nev. 1121 (2008) (the Act applied to the distribution of the proceeds of life insurance where the will and policies did not address simultaneous death).
III.Interpleader
When an insurer is faced with competing claims to the proceeds of a life insurance policy, and has
a legitimate concern that it may be subject to liability for paying the life insurance benefit to the wrong beneficiary, then interpleader is a viable option to resolve the case. While an interpleader action does mean the
insurer will incur some level of costs and fees to bring the action, it also provides the benefit of avoiding having to evaluate multiple claims and allows the insurer to shift the decision-making to the court. The inter-
100 ■ Life, Health, Disability and ERISA ■ April 2015
pleader action also allows the insurer to avoid multiple liability and can serve as a defense to claimants who
assert bad faith claim handling against the insurer.
A.Jurisdiction
Many insurers seek to file an interpleader action in federal court in order to minimize any local “flavor.” There are two bases for federal jurisdiction for an interpleader action.
1. Rule Interpleader
Federal Rule of Civil Procedure 22 provides:
(a) Grounds.
(1)By a Plaintiff. Persons with claims that may expose a plaintiff to double or multiple liability may be joined as defendants and required to interplead. Joinder for interpleader is
proper even though:
(A) the claims of the several claimants, or the titles on which their claims depend, lack a
common origin or are adverse and independent rather than identical; or
(B) the plaintiff denies liability in whole or in part to any or all of the claimants.
(2) By a Defendant. A defendant exposed to similar liability may seek interpleader through a
crossclaim or counterclaim.
(b) Relation to Other Rules and Statutes. This rule supplements—and does not limit—the joinder of parties allowed by Rule 20. The remedy this rule provides is in addition to—and does not
supersede or limit-the remedy provided by 28 U.S.C. §§1335, 1397, and 2361. An action under
those statutes must be conducted under these rules.
A Rule 22 interpleader is essentially a procedural device that confers no jurisdiction in and of itself
and must be used in conjunction with either diversity jurisdiction under 28 U.S.C. §1332, or federal question jurisdiction, 28 U.S.C. §1331. See Commercial Union Ins. Co. v. United States, 999 F.2d 581, 584 (D.C. Cir.
1993). For example, federal jurisdiction would arise in a dispute over life insurance proceeds provided by an
employee welfare benefit plan governed by ERISA. If the interpleader action is based upon diversity jurisdiction, the amount in controversy must exceed $75,000. See 28 U.S.C. §1332. This is generally satisfied by the
amount of life insurance benefit in question.
2. Statutory Interpleader
The second basis for federal jurisdiction is through “statutory interpleader.” This is available pursuant
to 28 U.S.C. §1335 which provides as follows:
(a) The district courts shall have original jurisdiction of any civil action of interpleader or in the
nature of interpleader filed by any person, firm, or corporation, association, or society having in
his or its custody or possession money or property of the value of $500 or more, or having issued
a note, bond, certificate policy of insurance, or other instrument of value or amount of $500 or
more, or providing for the delivery or payment or the loan of money or property of such amount
or value, or being under any obligation written or unwritten to the amount of $500 or more, if
(1) Two or more adverse claimants, of diverse citizenship as defined in subsection (a) or
(d) of section 1332 of this title, are claiming or may claim to be entitled to such money or
property, or to any one or more of the benefits arising by virtue of any note, bond, certificate, policy or other instrument, or arising by virtue of any such obligation; and if
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 101
(2) the plaintiff has deposited such money or property or has paid the amount of or the
loan or other value of such instrument or the amount due under such obligation into the
registry of the court, there to abide the judgment of the court, or has given bond payable to
the clerk of the court in such amount and with such surety as the court or judge may deem
proper, conditioned upon the compliance by the plaintiff with the future order or judgment
of the court with respect to the subject matter of the controversy.
(b) Such an action may be entertained although the titles or claims of the conflicting claimants
do not have a common origin, or are not identical, but are adverse to and independent of one
another.
Statutory interpleader provides a more liberal jurisdiction requirement for several reasons. First, it
requires only minimal diversity. That is, rather than having to show complete diversity of citizenship it need
only be shown that any two of the claimants to the insurance proceeds are diverse. The diversity of the insurer
is immaterial. See, e.g., United Benefit Life Ins. Co. v. Leech, 326 F.Supp. 598, 599-600 (E.D.Pa. 1971). In addition, the amount in controversy need only be $500 or more.
Note, however, that if the controversy surrounds the proceeds of an employee welfare benefit plan
governed by ERISA, even if there is not minimal diversity as required by the statute, jurisdiction is still available through Rule 22 under federal question jurisdiction.
B.Venue
1. Rule Interpleader
For an interpleader action filed pursuant to Rule 22, the general venue provision of 28 U.S.C. §1391
governs. Thus, generally speaking, the action may be brought in the following:
(a) If all defendants are residents of the same state, the action may be brought in the judicial district
in which any defendant resides;
(b) A district in which a substantial part of the events giving rise to the claim occurred, or a substantial part of the property as the subject of the action is situated; or
(c) If there is no district in which the action may otherwise be brought, any district in which any
defendant is subject to the court’s personal jurisdiction.
2. Statutory Interpleader
Venue is also governed by statute. 28 U.S.C. §1397 provides any interpleader action brought pursuant
to §1335 may be brought in any district in which one or more of the claimants reside.
C. Minor Claimants
Special challenges arise when a party interested in the proceeds of the life insurance is a minor. In
such a case, the court must ensure that the minor is adequately represented. See, e.g., Allstate Life Insurance
Company v. Dall, 2009 WL 3806310 (E.D.Cal. 2009)(district court, on its own, required counsel for minor to
justify request for fees); Tuesno-Evans v. Prudential Ins. Co. of Am., 2013 WL 3804596 (S.D.Miss. 2003)(court
appointed guardian ad litem for interpleader defendant minor).
One problematic situation is the payment of death benefits to the parent or other guardian of a
minor. The payment to that guardian does not protect the insurer in an action by the minor to recover the
proceeds of the policy if the guardian did not have authority over the death benefit.
102 ■ Life, Health, Disability and ERISA ■ April 2015
In Iverson v. Scholl Inc., 483 N.E. 2d 893 (Ill. App. Ct. 1985), the insurer paid a life insurance benefit
to the beneficiary, an 11-year old minor. The minor’s father induced her to endorse the check and then misappropriated the proceeds. The court noted its obligation to guard the rights of minors. It held that the ignorance of the insurer as to whether or not the beneficiary was a minor, or whether the insurer acted in good
faith, was not a defense. The court held the insurer had the duty to see that the minor received the proceeds,
and because she was legally incompetent to complete the transaction, payment should have been made on her
behalf to her legal representative. The insurer was required to issue a second payment to the minor.
Federal Rule of Civil Procedure 17(c) provides the following:
(c) Minor or Incompetent Person.
(1)With a Representative. The following representatives may sue or defend on behalf of a
minor or an incompetent person:
(A) a general guardian;
(B) a committee;
(C) a conservator; or
(D) a like fiduciary.
(2)Without a Representative. A minor or an incompetent person who does not have a duly
appointed representative may sue by a next friend or by a guardian ad litem. The court
must appoint a guardian ad litem—or issue another appropriate order—to protect a minor
or incompetent person who is unrepresented in an action.
A minor’s representation by an attorney is insufficient to satisfy the requirements of Rule 17. See U.S.
v. 30.64 Acres of Land, 795 F.2d 796, 805 (9th Cir. 1986).
As a general rule, a federal court cannot appoint a guardian ad litem in an action in which the minor
is represented by someone who is considered appropriate under the law of the forum state. See Developmental
Disabilities Advocacy Center, Inc. v. Melton, 689 F.2d 281, 286 (1st Cir. 1982). The court is obligated to abide by
the state’s determination of who shall represent the minor and Rule 17 should not be used to circumvent that
determination. T.W. v. Brophy, 124 F.3d 893, 895 (7th Cir. 1997).
A district court does have the discretion and authority to remove a guardian ad litem or stateappointed conservator to protect the best interest of a minor because federal law, not state law, governs the
appointment of a guardian ad litem in federal court. Gibbs v. Carnival Cruise Lines, 314 F.3d 125, 134-35 (3rd
Cir. 2002). The ultimate decision whether to appoint a guardian ad litem or retain a state-appointed conservator rests within the sound discretion of the district court and will not be disturbed unless there has been an
abuse of authority. Sam M. v. Carcieri, 608 F.3d 77, 85 (1st Cir. 2010).
Counsel for insurers who become aware of a minor may have an ethical duty to make the court aware
of the situation. If and when the court becomes aware of such a defendant, it will typically enter a factual finding regarding the minor’s need for a guardian ad litem.
D. Interpleader Under ERISA
While the typical scenario results in an interpleader action being filed is 1) an insurer, 2) faced with
competing claims to insurance proceeds, 3) makes no decision, 4) files the interpleader action with the court,
5) deposits the disputed funds with the court, and 6) requests a dismissal, more may be required in a case governed by ERISA, especially if the arbitrary and capricious standard of review applies.
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 103
In Forcier v. Metropolitan Life Insurance Company, 469 F.3d 178 (1st Cir. 2006), the First Circuit Court
of Appeals addressed several issues regarding the filing of an interpleader action as to a group life insurance
policy governed by ERISA.
The insured died while in the midst of a divorce proceeding. He was covered under a group life policy through his employer. He had not designated a beneficiary. The plan provided that in such a circumstance
MetLife could pay the insured’s spouse, parent, child, sibling or the estate. Regardless of who received payment, the plan provided that such a payment would discharge MetLife’s liability for the proceeds.
The plan language at issue is known as a “Facility of Payment clause.” Such clauses allow for payment
to any person found by the insurer to be equitably entitled. Such clauses also protect the insurer by reserving
to it wide discretion regarding the payment of the proceeds. The court held that such clauses are not intended
to give any prospective beneficiary or any other person a right to sue for the proceeds.
A dispute arose between the wife and the estate regarding the life benefit. The estate then brought
suit against MetLife and the wife. MetLife filed a claim for interpleader. The district court ruled in favor of the
insured’s parents.
The First Circuit, noting that MetLife effectively served as both plan administrator and insurer,
stated that MetLife “defaulted on its obligation to make the initial benefits determination,” and instead shifted
that burden to the district court. The court found that the policy provided an acceptable process for MetLife
to determine to whom to pay benefits and which would have also shielded MetLife from liability. The court
stated it was possible that had there been a timely objection, the district court could have found the interpleader improper and remanded the case to MetLife for an initial benefits determination. However, neither
party raised such an objection.
The First Circuit then examined the question of whether, because MetLife did not make an initial
benefit determination, the district court assumed the same discretion as the policy conferred upon MetLife.
The court held it found no basis to suggest that, as MetLife’s surrogate, the district court was disqualified from
taking full advantage of the discretion contained in the policy. It therefore affirmed the district court’s decision. See also Metropolitan Life Ins. Co. v. Price, 501 F.3d 271, 281 (3rd Cir. 2007) finding the opinion in Forcier
to be persuasive).
The court in Metropolitan Life Ins. Co. v. Shaw, 2013 WL 1702080 (W.D.La. 2013) took the issue one
step further. There, MetLife filed an interpleader seeing a determination of the appropriate beneficiary to pay
the proceeds of a life insurance policy. The plan did contain a Facility of Payment provision but MetLife took
the position that it could not determine the proper beneficiary. However, the court refused to make that determination. The court held that its role was to review the claim administrator’s determination “for abuse of
discretion, not to render the decision in the first place.” Therefore, the court denied the pending motions for
summary judgment. The court also gave notice of its intent to dismiss MetLife’s claim for lack of an active case
or controversy. See also Life Ins. Co. of North America v. Nears, 926 F.Supp. 86 (W.D.La. 1996).
The need for a claim administrator to make a decision on the appropriate beneficiary is not the
majority view. See Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436 (2d Cir. 2002); Guardian Life Ins. Co. of Am. v.
Finch, 395 F.3d 238 (5th Cir. 2004); Metro. Life Ins. Co. v. Marsh, 119 F.3d 415 (6th Cir. 1997); Alliant Techsystems, Inc. v. Marks, 465 F.3d 864 (8th Cir. 2006); Metro. Life Ins. Co. v. Parker, 436 F.3d 1109 (9th Cir. 2006). The
philosophy behind these decisions is that if courts demanded a fully developed record and a final benefits
decision, ERISA plans might face exposure to multiple lawsuits from disappointed claimants.
An alternative, however, is for the claim administrator to make a decision, give interested parties an
opportunity to object, and if objections remain, file an interpleader. In that way, plans can continue to take
104 ■ Life, Health, Disability and ERISA ■ April 2015
advantage of the arbitrary and capricious standard of review, if applicable; insulate themselves from multiple liability by virtue of not paying the proceeds; and, enhance their chances of obtaining an award of attorney’s fees for an interpleader action by virtue of the fact of having a fully developed record and providing the
objecting parties with an opportunity to withdraw their objections.
A good example of this is the decision in Sun Life Assurance Co. of Canada v. Sampson, 556 F.3d 6 (1st
Cir. 2009). There the court upheld the district court’s award of attorney’s fees to Sun Life as a result of its need
to file an interpleader action. In that case, a dispute arose as to whether the life insurance benefit should be
paid to the deceased’s husband, or the husband and his children. Sun Life offered to pay the proceeds just to
the husband provided it receive a release from each of his children. The husband refused, claiming the wording of the release was too broad. One of the reasons given by the district court when awarding fees to Sun Life,
and affirmed by the First Circuit, was the fact that Sun Life had attempted to resolve the matter without litigation.
E. Avoiding Litigation
While interpleader may be the last and best hope for an insurer to resolve competing claims to the
death benefit, the question should first be asked whether the dispute can be resolved short of filing suit. If the
case is governed by ERISA, do the plan documents provide a definitive answer? If not governed by ERISA,
does the applicable state law provide an answer, such as the laws of intestacy? Depending on the answers to
these questions and how definitive those answers are, serious consideration should be given to drafting a decision which is sent to all competing claimants and inviting a response. It may lead to a resolution of the claim
without the need for suit.
An insurer should also investigate the basis for the competing claims. In many cases, objections are
made without significant thought and are based upon emotion, the desire to obtain unrelated concessions
from the other claimants, or simply based upon ignorance of the plan language or applicable law. Again, a
well-developed claim file or administrative record may result in some of these claims being dropped. Even if
they are not, they provide compelling evidence to the court to support an award of attorney’s fees to compensate the insurer for the cost of bringing the interpleader.
It is also recommended that in any final communication to the competing claimants it is pointed out
that interpleader litigation will result in a diminishment of the benefit.
IV.Conclusion
While it is a certainty that disputes will arise from time to time regarding the proper beneficiary
of life insurance policies, applicable statutes and case law provide answers to many of these disputes. When
answers are not readily available, the law does provide an option for insurers through the use of interpleader
to avoid liability and to, hopefully, establish a streamlined process to determine the appropriate recipient of
the life insurance proceeds.
Minor and Beneficiary Disputes and the Role of Interpleaders ■ Austin and Hamilton ■ 105