It's used when there is a defined fund in a finite amount
with multiple claimants with claims, either aggregate or individual, which exceed the amount of the fund,
or there is a dispute over who gets what.
For example, say that a motorist is 85 years old, unemployed, has no personal assets.
He rents, leases his car, and basically has $2500
in the bank. He lives on Social Security.
But, he has liability insurance on the car
of $25K per person/$50K/per accident.
Say that he runs down 4 people in a crosswalk,
leaving one dead, one a quad, and 2 others
with a broken hip and fractured pelvis, respectively.
Any one of those claims is worth more than $25K,
yet there are 4 competing claims with a maximum
amount available of $50K, with each individual's
claim limited to a maximum of $25K.
Since the driver has no assets to chase,
there is virtually no possibility for recovery beyond
the policy limits.
The carrier cannot favor one claimant over the other,
so it can't pay 2 of them each $25K, leaving the others
uncompensated at all. If the competing claimants
cannot work it out between themselves, the carrier
can use the interpleader route.
The one drawback to this procedure in my
example is that the carrier must defend the
driver in the litigation filed ny the claimants, but that's
a separate issue.
A better example in the insurance context is where
life insurance proceeds are available, but there is a dispute between competing claimants as to the proceeds.
The stakeholder(carrier) doesn't care who gets the money,
it just wants to pay the fund and get out. That's what interpleader is for. |
