Key Decisions

September 2013 – Attorney’s Fees Were Properly Awarded In An Interpleader Lawsuit

(filed under: Key Decisions Archive | September 24, 2013)

Attorney’s Fees Were Properly Awarded In An Interpleader Lawsuit

Farmers New World Life Insurance Company v. Rees
(Cal. Ct. of App., 2d Dist.), filed August 30, 2013, published August 30, 2013

KEY FACTS

Frank and Rosamaria Rees married in 1997. In May 1998, they each obtained from Farmers New World Life Insurance Company, a life insurance policy with benefits of $150,000. Rosamaria’s policy insured her life, and Frank’s policy insured his life. They named the other as the sole primary beneficiary and listed no contingent beneficiaries.

On September 18, 2009, Rosamaria was shot and killed in the street outside the home she shared with Frank.

A Farmers claims representative contacted Frank, who indicated that the LAPD was investigating Rosamaria’s death as a homicide. Further investigation showed that the LAPD had not ruled anyone out as a suspect. Based on the fact the LAPD had not ruled anyone out, Farmers deferred making a claims decision. It then filed an interpleader action in which it asked the court to figure out whether Frank, as the beneficiary, was entitled to the policy proceeds or whether Rosamaria’s mother, who would be entitled to them if Frank was the killer, was entitled to them.

Frank appeared in the action. Rosamaria’s mother did not and was defaulted. Based on the fact that Rosamaria’s mother was defaulted, the court ruled Frank was entitled to the policy proceeds, less attorney’s fees Farmers incurred in bringing the interpleader action and in filing a challenge to Frank’s right to the proceeds.

Frank appealed based on his contention that Farmers should not have been allowed to offset the payment by its attorney’s fees.

HOLDING & REASONING

The Court of Appeal affirmed.

The court rejected Frank’s contention that the attorney fees and costs award was erroneous because his right to the policy benefits never was in dispute and that as a result, the interpleader action was unnecessary and the statutory requirements for attorney fees and costs unmet. It ruled that under the circumstances, Farmers was entitled to file an interpleader action, and the court did not err by exercising its discretion to award attorney fees and costs.

ANALYSIS

Significantly, this case does not grant insurers an unfettered right to file interpleader actions and then deduct their attorney’s fees any time there is a dispute as to how policy proceeds are to be allocated. The court expressly held that under the circumstances of the particular case, the trial court had not abused its discretion in awarding Farmers its attorney’s fees and costs.