Life insurance is designed to provide financial security and peace of mind to loved ones after a person’s death. Unfortunately, it can sometimes have the opposite effect—sparking conflict between beneficiaries over who is entitled to the proceeds. These disputes can be emotionally charged and legally complex, involving allegations of fraud, undue influence, or conflicting policy documents.
While some of these cases proceed to trial, the vast majority are resolved through settlement. Here’s why parties in life insurance disputes often choose to settle rather than go to trial.
1. Avoiding Lengthy Delays
Life insurance companies often deposit disputed policy proceeds with the court in a process called interpleader, which stops them from being liable while the beneficiaries battle it out. From there, the court process can take many months or years before a final decision is reached and that decision is possibly appealed. A settlement can resolve the dispute faster, allowing parties to access funds much sooner.
2. Minimizing Legal Costs
Litigating a life insurance dispute can be expensive. These cases often require attorneys and in some cases, handwriting analysts to review signatures or medical witnesses to evaluate mental capacity or intent. The longer the dispute lasts, the more fees accumulate—sometimes significantly reducing the value of the death benefit. Settling early can preserve more of the policy proceeds for the actual beneficiaries.
3. Reducing Emotional Stress
These disputes often arise during an already painful time—after the loss of a loved one. Going through depositions, court hearings, and cross-examinations can add unnecessary emotional strain, particularly when the dispute involves family members. Settlement allows parties to resolve their differences without deepening personal rifts or airing family conflicts in open court.
4. Controlling the Outcome
When a life insurance case goes to trial, the outcome rests in the hands of a judge—or sometimes a jury. There’s no guarantee how they will interpret the evidence, especially in cases involving ambiguous policy documents, handwritten beneficiary changes, or allegations of duress or lack of capacity. By settling, the parties maintain control and can craft a resolution that reflects their unique circumstances and legal positions.
5. Flexibility in Dividing Proceeds
Settlements allow parties to agree to a distribution of the death benefit that may not be possible in court. For example, the proceeds could be divided based on years of caregiving, contributions to the deceased’s welfare, or other personal factors that a court might not consider relevant. Parties can also agree to trusts to manage distributions.
6. Preserving Family Relationships
Life insurance disputes frequently involve surviving spouses, children, siblings, or other close relatives. A public and adversarial court battle can permanently damage family relationships. A private, negotiated settlement can help de-escalate tensions and preserve whatever ties remain among surviving family members.
Conclusion
Life insurance disputes can be legally complex and emotionally sensitive. While some cases must go to trial to achieve justice—particularly where fraud or undue influence is involved—many are better resolved through negotiation and settlement. Doing so saves time, money, and stress while allowing families to maintain some control over the process and outcome.
If you’re involved in a dispute over life insurance death benefits, it’s critical to speak with an experienced attorney who understands the unique issues these cases involve and can help you navigate your options—whether in court or at the settlement table.
Joel Ewusiak frequently represents beneficiaries who are named as defendants in interpleader complaints filed by life insurance companies and seeking their rightful and fair share of the death benefits. Please contact Joel for legal assistance with your specific matter.