An interpleader action is an acknowledgment by a property holding party, that the property in question belongs to another party. The property holder is petitioning the court to correctly distribute the property in question. These actions typically involve an injured party and their health and auto insurance companies.
After an auto accident, the injured party may have their medical treatment covered by their own auto or health insurance. In this instance, when the driver receives compensation through an insurance settlement, their auto and health insurance companies can seek compensation for the financial assistance they provided. They can do this because your health and auto insurance companies are not liable for your injuries; the responsibility for these damages falls on the at-fault driver and their insurance.
For example, if a truck hits an SUV, assuming the truck holds 100% fault, the driver of the SUV can seek compensation from the truck’s insurance company. However, the SUV driver may not be able to wait for compensation before they receive medical treatment. In this instance, they would turn to their own auto or health insurance to front the cost of their medical treatment. When the at-fault driver’s insurance settles with the injured party, the SUV driver’s health and auto insurance can legally claim a portion of the settlement for repayment.
However, your auto insurance company cannot pursue compensation from your settlement if you are injured by an uninsured/underinsured driver and you have uninsured/underinsured coverage on your auto policy.
In this scenario, an interpleader action would be filed by the SUV driver; having the courts decide how the settlement would be distributed between themselves and their health and/or auto insurance.
An interpleader action causes the claimants (in this case, health and auto insurance) to argue with each other, and not the property holder. However, in order to file this action, the property holder must demonstrate that they:
- Have no interest or claim on the property aside from using it to repay incurred bills
- Are not in league with a claimant
- Are willing to submit the property in question to the court, or dispose of it as directed by the court.
An interpleader action is a civil proceeding that creates a neutral space for separate parties to negotiate and resolve a dispute regarding the proper designation of the property.
Additionally, an interpleader action stops the claimants (health and auto insurance companies for example) from individually pursuing the property holder for compensation.
There are two phases of an interpleader. The first phase determines if an interpleader action is applicable to a case; the second phase results in the distribution of the property in question.
What are the Benefits?
These actions protect the property holder from facing several lawsuits regarding the same property. They also protect the pursuant parties, in that all claimants have a chance to receive a portion of the property.
An interpleader action can also protect the property holder from fraudulent claims of personal negligence regarding the property in question; as they generally have to turn the property over to the court. Additionally, interpleaders have no filing time limit, and the court may even pay the attorney fees for the plaintiff (property holder).
What is the Process?
Typically, this process begins with a complaint filed by a party (usually the property holder), who then submits the property in question to the court. After the pursuant claimants receive notification of the action, they submit their arguments regarding the claim they have on the property. However, if a claimant does not want the property, they may also declare their disinterest.
The court must then determine if this action meets both the requirements of a statutory interpleader action. These requirements include the following:
- A single property is at issue
- There are several adverse claimants to the fund or property
Once the court determines that these requirements have been met, the property holder can request an Order for Discharge. If this request is granted the property holder will be dismissed from the remainder of the proceeding.
To obtain an order for discharge, the property holder must file a motion; requesting payment for both the plaintiff’s attorney and court fees to be paid from the property in dispute. Upon motion approval, the court will determine the appropriate fee for the attorney. The motion must specify who is receiving funds from the property and the amount they will receive. The property holding party is then dismissed from the proceeding. The court will then distribute the remaining property between the claimants.
Types of Interpleader Action
Statutory- allows a property holder, with property claimed by at least two adverse parties, to interplead those claimants bringing them together in a singular action. However, the property in question must be greater than or equal to $500.00. Additionally, this action must be initiated by the property holder. The judicial body that will process this action is the judicial district in which one of the claimants resides.
Rule- the property in question must be worth more than $75,000. The property holder may enter into this action as the plaintiff or as a counter-claimant. The property holder, in this case, does not have to turn the property in question over to the court. However, if they request an order of discharge, they must submit the property to the court.
Were you or someone you know involved in a recent auto accident? Call Auto Accident Care Network now at 801-683-1948 to connect with a live care advocate. Our team at AACN can connect you to trusted attorneys and doctors to schedule a free legal consultation, a free thirty-minute massage, and a no-cost medical exam!