Utah federal court approves insurance company's fees

Federal law allows an insurance company to file an interpleader if there is a dispute over the proper beneficiary of an ERISA life insurance policy. The typical procedure is for the insurance company to file the interpleader and, once the claimants appear, file a motion to deposit the policy proceeds in the registry of the court.  As part of that process, the insurance company will typically ask the court to dismiss the insurance company and to award its fees and expenses in filing the interpleader.

Often, the contestants can agree with the insurance company on the amount of fees.  I have found that many insurers will agree to substantially limit or reduce the fees they are seeking. This is particularly if the contestants agree to the insurance company depositing the funds and being released with prejudice.

One or both parties claiming the proceeds may seek to pursue a claim against the insurance company.  But such claims should be asserted only with great care, as the policy proceeds can be reduced significantly if the insurance company has to defend a claim.  Given the favor given to the interpleader process as something of a "safe harbor," claims based simply on side being disgruntled because the insurance company did not chose them as the rightful beneficiary are unlikely to succeed.

In Life Insurance Company of North America v. Wagner, et al, (2016 WL 3014663) the contesting parties suggested the fees sought by the insurance company's lawyers was "a little high."  To protect the policy proceeds as much as possible, Judge David Sam of the Central Division of Utah required the insurance company's lawyers to submit evidence in support of the fee request.  The court approved the attorney's fees after the insurance company trimmed the request by about 10%.

The decision itself is not particularly interesting.  But it emphasizes that courts will award reasonable and necessary attorney's fees to an insurance company that files an interpleader to determine the proper beneficiary of policy proceeds.