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11/21/13 It's The Law: Interpleader-An Option When You Don't Know Who To Pay

lt's The Law

Interpleader-An Option When You Don't Know Who To Pay

(11/21/13)

Question:

I was in a car accident and made a claim for payment from the other person's insurance company. Another person also made a claim. The insurance representative claims he does not know who should be paid and will be filing an interpleader action with the court. Can you explain "interpleader"?

Answer:

It sounds like there are more claims to the insurance money than there is available money. That puts the insurer in a difficult position. If the insurer chooses who to pay and a court later decides the insurer was wrong, the insurer may have to pay twice. Fortunately for the insurer, there is a way out of this quandary. It is known as "interpleader".

Interpleader is intended to protect a person holding funds (like an escrow agent in a real estate transaction or the insurer in your case) when two or more persons make a claim to those funds. It is a procedure through which the person holding the funds asks the court to decide who gets those funds. It has been used for escrow disputes, claims to sale proceeds, and even claims of beneficiaries under wills or IRAs.

Interpleader in Florida is governed by Florida Rules of Civil Procedure 1.240, which is a rule promulgated by Florida's Supreme Court. The person holding the funds to which two or more persons make claims files suit asking the court to decide which claimant gets the funds. If the court finds the interpleader appropriate, the person filing suit is dismissed from the case, the funds are deposited into the court registry, and the claimants litigate between themselves the issue of entitlement. Interpleader is only available if the person holding funds has no interest in those funds and is not otherwise liable to any of the claimants.

Interpleader cases assume one of the claimants is entitled to the funds and the other(s) have no valid reason for interfering. Under those circumstances, it would be unfair to cause the person holding funds to incur any expense. The fund holder is merely trying to avoid liability for wrongful disbursement, through no fault of his or her own. Consequently, the fund holder may recover attorney's fees and costs in the interpleader action, which are paid from the interpleaded funds.

The court will order an unsuccessful claimant to pay the amount of any fees and costs awarded the fund holder so that the prevailing party is entitled to all of the funds in dispute. However, the prevailing party may have to pursue action to collect fees and costs from the loser. If the funds holder delays filing interpleader and is sued by one of the claimants, the right to attorney's fees and costs from the interpleaded funds is lost.

Interpleader is intended to protect a person holding funds to which more than one other person makes a claim. Because that protection allows the fund holder to recover attorney's fees and costs from the funds it holds, the protection is to the detriment of any third party entitled to those funds. For that reason, especially when the disputed funds are small, it may be in the best interest of even the rightful claimant to settle a dispute and accept a reduced amount before the interpleader action is filed.

These cases can be complex and since they are like any other lawsuit, attorney's fees and costs can be expensive. A claimant to disputed funds is well advised to retain an experienced attorney early in the process.

By: William G. Morris, Esquire

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.

Questions for this column can be sent to: William G. Morris, e-mail: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722 or

The Marco Island Eagle

Other articles of interest can be viewed at our website, www.wgmorrislaw.com.

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