In an interpleader action, what is a typical step taken by the insurer?

• A. The insurer immediately selects one claimant and pays them.
• B. The insurer deposits the proceeds with the court and seeks a determination of rightful recipient.
• C. The insurer withdraws from any liability.
• D. The insurer delays payment until disputes are resolved informally.

Answer: (B)

When there are competing claims to the same life insurance proceeds, the insurer uses an interpleader to avoid favoritism and potential liability for paying the wrong claimant. A typical step is for the insurer to deposit the proceeds with the court, effectively placing the funds in the court’s hands. This stops the insurer from further dispute-prone liability and shows it remains neutral while the court determines who is entitled to the money. By bringing all claimants into one action, the court can resolve competing claims and issue a final determination or distribution order. Once the funds are in court and the claimants are before the court, the insurer is discharged from liability related to the distribution, subject to the court’s order.

Why the other options don’t fit: selecting a claimant and paying them would prematurely decide disputes outside the court, defeating the purpose of interpleader; withdrawing from liability isn’t the procedural step in interpleader and wouldn’t resolve the competing claims; delaying payment informally contradicts the purpose of using a court process to obtain a clear, judicial resolution.