Dallas Fort Worth Insurance Lawyer Blog
Life insurance claims attorneys have information about how life insurance claims should be handled that is valuable to someone who believes they have been wronged by an insurance company.
It will occasionally happen that the life insurance company pays the wrong person as the beneficiary of the policy.
Texas Supreme Court law going back to 1894 says that if insurance benefits are paid to a beneficiary who does not have an insurable interest, that beneficiary holds the proceeds for the benefit of those entitled by law to the proceeds. The 1894, case is Cheeves v. Anders. This position is supported as late as a 1998, opinion from the Tyler Court of Appeals styled, Stillwagoner v. Travelers Insurance Company.
But here is the problem with the above. Once the money is paid out to the wrong beneficiary, the odds of the rightful beneficiary being able to get that money is slim to non-existent.
So, here is what has to be done. When someone knows they have a claim to life insurance proceeds, they must immediately make a claim for those proceeds. The reason for an immediate response is that an insurer that knows of an adverse claim but pays the proceeds to someone without an insurable interest may be liable to the proper beneficiary or to the insured’s estate for the full amount of the benefits. This is discussed in the Stillwagoner case cited above.
The reason for immediately making the insurance company aware of the adverse claim, is found in the Texas Insurance Code, Section 542,058. This section tells the insurance company what to do when there are adverse claims. This section requires that the insurance company interplead the funds into the registry of the court so that the competing parties can litigate who is entitled to the proceeds. This also protects the insurance company from the fear of paying the wrong person and ending up being forced to pay the right person, the result being a double payment of the life insurance proceeds.