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What are Interpleader Proceedings? An Overview

Federal court building. What are interpleader proceedings?

Interpleader proceedings are legal proceedings used to resolve disputes in which multiple claimants have competing financial interests. These proceedings can reduce court costs and time spent in litigation. It allows claimants to bring their claims against a single defendant—the interpleader—who holds the disputed funds or property. If you want to know what are interpleader proceedings, keep reading.

What Are Interpleader Proceedings?

Interpleader is a legal process in which a party with an interest in the resolution of a dispute joins the lawsuit as a defendant to make sure the court will have authority to hear and decide the dispute. The party, known as the interpleader, typically does not have any direct involvement in the dispute beyond providing access to funds or property, which other parties hold subject to competing claims. As such, it makes sense for them to join an action since this could be more cost-efficient than allowing other parties to bring separate suits against them.

When is the Interpleader Process Used?

Interpleader proceedings are usually used by two or more parties to make a claim against an asset such as an insurance policy, bank account, trust fund, or escrow account. They may also be brought when a creditor is unsure of which party is owed funds and a third-party has possession of the money, property or asset.

What Are Interpleader Proceedings for Life Insurance?

If beneficiaries have a dispute over life insurance proceeds, the insurance company will often file a life insurance interpleader action. The insurer will deposit the insurance proceeds with the court. Then the beneficiaries can fight over who is entitled to the money. And the insurance company has no more involvement after that.

How to File an Interpleader Action?

To initiate an interpleader action, a person or entity who holds the asset must file a complaint against all the claimants. The entity must allege that it is neutral and unable to determine which of the parties is entitled to the asset. The complaint should also include the description of each claimant’s right or interest in the subject asset, to whom it belongs and any relevant facts supporting each party’s claim. The court will then rule on which party or parties have valid claims and provide instructions on how they will proceed with distributing the disputed insurance funds or asset accordingly.

In federal court, an interpleader action is governed by Federal Rules of Civil Procedure 22. An interpleader in Arizona Superior Court is governed by Rule 22 of the Arizona Rules of Civil Procedure.

Advantages of Interpleader

Interpleader proceedings offer a few distinct advantages over other dispute resolution methods. For starters, this process is expedient and cost-effective for the involved parties. In most cases, it saves time, money, and resources for all parties who are involved in the interpleader dispute. Additionally, because interpleader proceedings are held under the supervision of a court of law, all parties have more confidence that justice will be served fairly and without bias.

Disadvantages of Interpleader

Although interpleader proceedings have several distinct advantages, there are also some disadvantages to consider. For starters, the process can be complicated and expensive. Especially if it is held in a state court. Additionally, since the court is overseeing all aspects of the dispute resolution process, parties involved may not have much control of how quickly the case proceeds or what decisions are ultimately made by the court.

Are You Named In An Interpleader Action?

Don’t try to represent yourself. Interpleaders and civil litigation are complicated. We will be your advocate and make sure you are treated fairly. Call us today at 602-443-4888.

We handle life insurance interpleaders throughout the U.S.

Attorney Paul Deloughery studied insurance law in law school. He was a research assistant for a famous insurance law professor (Professor Alan Widiss). He has also handled many life insurance interpleader actions successfully. Give us a call at 602-443-4888 so we can help get your fair share.

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

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