Federal court interpleader jurisdiction

In Mudd v. Yarbrough, Judge Bunning of the United States District Court, Eastern District of Kentucky, considered a challenge to the court's jurisdiction. The decision involved a Servicemember's Group Life Insurance Policy, SGLI. 

After the insured servicemember's death, Prudential determined that his beneficiary designation was unclear. The servicemember's mother filed suit in the federal court in Kentucky claiming the benefits.  Prudential then filed an interpleader to have the court determine the proper recipient of the benefits. 

The court determined that it was proper for Prudential to file the interpleader,  because of competing claims to the benefits  made by the servicemember's mother, ex-wife, and estate.  The court found that Prudential was legitimately concerned it might face multiple liability if it did not pursue the interpleader.

Regarding proper subject matter jurisdiction, the court pointed to the requirements of 28 USC §  1335 Interpleader:

  • the amount of the controversy is over $500
  • two or more adverse claimants of diverse citizenship
  • the disputed funds must be deposited into the court's registry.

The court found the requirements were met. Prudential deposited the $400,000 policy proceeds into the court registry.  One claimant resided in Florida, the other in South Carolina.  Therefore, there was minimal diversity. 

Because of the low threshold for the policy amount and the minimal diversity requirement, I find that many life insurance beneficiary dispute interpleaders are filed in federal court.  

 

J. Michael YoungComment