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"No Cash on the Barrel-head, No Controversy, No Interpleader Jurisdiction"


Following is an excerpt:

Subject matter jurisdiction over interpleader actions as well as the constitutional case-or-controversy requirement are at the center of a recent decision from the United States Court of Appeals for the Seventh Circuit. In State Farm Life Insurance Co. v. Jonas, __F.3d__, 2014 WL 7399115 (7th Cir. Dec. 31, 2014), a husband and wife named each other as beneficiaries of their life insurance policies. After they divorced, the policies remained in force and later the wife died. The husband then sought to collect the $1 million proceeds from his ex-wife’s policy. The insurer resisted paying because of its concerns that the couple’s children may have been the rightful beneficiaries under their mother’s policy.

But under the Texas law that governed, an insurer that fails to pay within 60 days of receiving a claim may be assessed interest at 18% a year, plus attorney fees. The only way to avoid such interest and fees under Texas law was to bring an interpleader action, and the insurer did so in federal court. And because the couple’s children did not make a competing claim in this action, the district court ordered the insurer to pay the husband. Yet the husband was dissatisfied that the district court did not also award attorney fees and interest and appealed.



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