Silhouette of man and woman fighting over life insurance proceeds

Disputes over life insurance claims

There are two types of disputed life insurance claims. One type is when the insurance company has already paid the life insurance proceeds, but it was paid to the wrong person. The other type is when two or more people claim the same death benefits, but the insurance company hasn’t paid the claim to anyone yet.  This second type is the most common.

If the insurance company has already paid the death benefit, but it was paid to the wrong person, it could have happened because the insurance company made a mistake. It could also be that the insurance company permitted a beneficiary change without authority.  Either way, if the insurance company made a mistake by paying the benefit to the wrong person, the insurance company could possibly be forced to pay twice.

The more common scenario occurs when competing claims are submitted after a person’s death, and both claimant’s have a reasonable argument as to why they are the proper person to receive the proceeds.  This most often happens when children and a step-parent or ex-spouse of the deceased person both believe they are entitled to the death benefit. If both of the claimants can demonstrate even a possibility that they could be right, the insurance company will probably withhold payment until one of following four things happens:

  1. The insurance company may send letters to the competing claimants giving them a short period of time (usually 30 days) to agree on a division of the death benefits.  However, very few people feel like splitting a pot of money with someone who they don’t think is entitled to any of it.
  2. Another possibility is that a claimant can ask an attorney to review the case and run through the laws of the state governing the insurance policy in question with the attorneys for the life insurance company.  Sometimes, not always, the claimant’s attorney can convince the life insurance company that the proceeds should legally be paid to one of the claimants and not the other.  Remember, just because insurance companies sell policies all over the country, they rely on outside lawyers to guide them on the laws of the states.
  3. The third option occurs when the insurance company files an interpleader lawsuit and asks a court to decide who should get the death benefits.  When disputed claims can’t be settled, this is usually what happens.  The downside to interpleader litigation is that once it starts, it can take anywhere from 6 months to 2 years for the matter to be concluded, on average.  All the while, the money is unavailable to the people who need it to pay life’s expenses.
  4. One of the claimants can file an interpleader lawsuit asking that the court order that the insurance company deposit the death benefits with the court.

If you are in the middle of a fight over the proceeds of a life insurance policy, we strongly recommend that you speak with a life insurance attorney.  If your dispute can be resolved without heading to court, it can save you considerable time and money, as well.  In almost all cases, the life insurance company gets to reimburse itself the money it spends on attorney’s fees and court costs directly from the death benefits.

If your life insurance claim is being contested, don’t wait. Contact us right away.