Life Insurance Companies Should Interplead When They Suspect Foul Play

Arthur A. Palmunen (attorney, Hartford, CT) recently published his article entitled Using Interpleader in Life Insurance Disputes Where the Beneficiary May Have Killed the Insured, The Brief:  39 Tort Trial & Insurance Practice Section 38 (Summer 2010).  An excerpt from the introduction is below: 

While some have considered killing their spouses to collect insurance money, a relatively small percentage actually follows through with the plan. Of course, our legal system prevents the nefarious murdering spouse or other beneficiary, if caught, from benefiting from such a foul deed. Almost every state has a “slayer” statute that prevents a murderer from inheriting from the deceased or collecting insurance proceeds from a policy on the deceased, and those states that do not generally reach the same result through application of the common law.

Unfortunately, this common-sense approach promoting sound public policy can create a dilemma for insurance companies.

 . . .

This article suggests that the best strategy is almost always to interplead of foul play is suspected, for several reasons: (1) courts sometimes impose a “duty” to interplead; (2) the policy may be held void ab initio; (3) if applicable, the Employee Retirement Income Security Act could preempt the slayer statutes; and (4) to protect from a bad faith claim.