United States District Court, E.D. Wisconsin
DECISION AND ORDER FOR DEPOSIT OF FUNDS AND ATTORNEYS
William C. Griesbach, Chief Judge United States District
Thrivent Financial for Lutherans (“Thrivent”)
filed this interpleader action against decedent Stephan
Batchelder's ex-wife and two sons due to their
conflicting claims for the proceeds of a life insurance
policy (“Policy”) Thrivent issued to the
decedent. Thrivent is a fraternal benefit society organized
under the laws of the State of Wisconsin with its principal
place of business in Appleton, Wisconsin. The decedent's
ex-wife, Signe Warpness, is a citizen of the State of
Colorado. His sons, Kurt and Erik Batchelder, are citizens of
the State of Florida, and the proceeds of the policy exceed
$500. Thus, this court has jurisdiction under 28 U.S.C.
case is before the court on Thrivent's motion to deposit
with the court the proceeds of the policy, which with
interest amounted to $194, 649.02 at the time the motion was
filed, and for payment of its own attorneys fees and costs in
the amount of $10, 491.20. Defendants, referred to herein by
their first names in order to avoid confusion, argue that the
fees and costs requested by Thrivent are unreasonably high.
For the reasons stated herein, Thrivent's motion will be
granted in part.
issued a life insurance policy to Stephan Batchelder on May
8, 1984, with a face amount of $184, 080.56. Compl., ECF No.
1, at ¶ 8. Currently, the accrued interest is $10,
568.46, making the total admitted liability $194, 649.02,
which will continue to accrue interest until it is paid.
Id. at ¶ 8; ECF No. 16 at ¶ 2. Stephan
designated Signe Batchelder (now Signe Warpness) as the
primary beneficiary, and designated the “children of
the Insured” as contingent beneficiaries. Compl. at
¶¶ 9-10. Stephan and Signe divorced in 1997 and
entered into a Separation Agreement which contained two
provisions bearing on his obligation to maintain life
insurance. First, the Separation Agreement required Stephan
to maintain $100, 000 of life insurance payable to Signe as
long as he was under any obligation to pay alimony to her.
Except for the event of death, alimony payments were to
continue until her remarriage, death, or at such time as she
attained the age of eligibility for benefits under the share
of his retirement plans that she received in the divorce. A
second provision required Stephan to maintain $84, 000 of
insurance on his life naming the wife, Signe, as trustee for
the benefit of the children. The provision stated that the
wife as trustee shall be the sole beneficiary until the
youngest child attains the age of twenty-three. Stephan died
on June 11, 2015, in Suzhou, China. Compl. at ¶ 14.
letter sent to Thrivent on September 5, 2015, Signe claimed
to be a beneficiary to the Policy. Id. at ¶ 15.
At the time of his death, however, Stephan's home address
was in Florida. Florida law statutorily voids a
decedent's beneficiary designations of former spouses for
life insurance policies subject to certain prescribed
exceptions. Fla. Stat. § 732.703(2). In addition,
Stephan had remarried after the divorce, and at the time of
his death, he was married to a Chinese national. Finally, his
adult sons Kurt and Erik, both in their mid-thirties, were
contingent beneficiaries under the terms of the policy and
the intended beneficiaries under the Separation Agreement.
Under these circumstances, Thrivent could not determine who
was entitled to receive the proceeds.
retained counsel to assist it in making that determination
and, if necessary, commencing an interpleader action.
Id. at ¶ 18. Prior to filing, Thrivent was able
to locate decedent's Chinese widow and obtain from her a
disavowal of any claim on her behalf. Thrivent also attempted
to assist the parties in resolving the matter. Since the
filing of this claim, Signe persists in her claim to all of
the proceeds, now supported by her son Kurt. Erik contends
that the beneficiary designation of Signe is void and claims
he is entitled to half of the Policy proceeds, with the
balance owed to his brother. ECF No. 34 at 3-4; ECF No. 22 at
1. In any event, due to the conflicting claims of the
potential beneficiaries, Thrivent's inability to
determine who is lawfully entitled to the proceeds of the
Policy, and Thrivent's consequent vulnerability to
lawsuits arising from the vexatious claims to the Policy,
Thrivent seeks interpleader relief. Compl. at ¶¶
21-22. Thrivent requests that the court accept for deposit
the policy proceeds, discharge Thrivent from liability, and
award Thrivent attorney's fees and costs. Id. at
surprisingly, Defendants do not oppose Thrivent's request
to deposit the proceeds of the policy with interest with the
court, and that part of Thrivent's motion will be granted
as a matter of course. Defendants do challenge, however,
Thrivent's request for attorney's fees. Defendants
contend that Thrivent should only recover attorney's fees
and costs incurred in initiating and litigating the
interpleader action, but not for expenses that predate this
action, such as “tracking down possible claimants in
China and attempting to negotiate a settlement.” Erik
Br. in Opp'n, ECF No. 21, at 1; Signe Br. in opp'n,
ECF No. 26, at 1; Kurt Br. in Opp'n, ECF No. 27, at 2.
courts award attorney's fees from the deposited fund when
(1) the party seeking fees is a disinterested stakeholder;
(2) the party concedes liability for the funds; (3) the party
deposited the funds into the court; and (4) the party sought
discharge from liability. Hartford Life & Acc. Ins.
Co. v. Sabol, No. 09-C-45, 2010 WL 519725, at *3 (E.D.
Wis. Feb. 9, 2010); see also Law Offices of Beryl A.
Birndorf v. Joffe, 930 F.2d 25, 25 (7th Cir. 1991).
Courts have broad discretion in determining whether to award
attorney's fees in an interpleader action, and if
awarded, the amount. Lutheran Brotherhood v. Comyne,
216 F.Supp.2d 859 (E.D. Wis. 2002) (citation omitted). In the
Seventh Circuit, a court may award attorney's fees and
costs “to a prevailing stakeholder in an interpleader
action if the costs are determined to be reasonable and the
stakeholder's efforts are not part of its normal course
of business.” Aaron v. Mahl, 550 F.3d 659, 667
(7th Cir. 2008) (citing Union Cent. Life Ins. Co. v.
Hamilton Steel Prods., Inc., 493 F.2d 76, 79 (7th Cir.
1974); Travelers Indem. Co. v. Israel, 354 F.2d 488,
490 (2d Cir. 1965)).
case, Thrivent seeks expenses incurred both while attempting
to identify and locate the individuals with a potential
interest in the Policy's proceeds, facilitating
settlement negotiations amongst the claimants, and filing the
interpleader action. Defendants contend that these efforts
are a part of Thrivent's normal course of business.
Indeed, some courts have denied an insurance company's
request for attorney's fees and costs related to bringing
an interpleader action, reasoning that filing for
interpleader relief is part of the company's ordinary
course of business. See, e.g., Midland National
Life Insurance Co. v. Ingersoll, No. 13-C-1081, 2014 WL
7240268 (E.D. Wis. Dec. 18, 2014) (denying an insurance
company attorney's fees incurred in pursuit of
interpleader relief because such companies should expect to
file interpleader complaints on occasion); Music Group,
Ltd. v. Chrysalis Records, Inc., 552 F.Supp. 44
(D.C.N.Y. 1982) (“[I]n cases in which the claims are of
the type that arise in the ordinary course of business, fees
should not be granted perfunctorily; such is a cost of doing
business that should not be transferred by invoking
interpleader.”); Western Life Ins. Co. v.
Nanney, 290 F.Supp. 687 (D.C. Tenn. 1968).
hiring a law firm and commencing a legal action to determine
the rightful beneficiary of a life insurance policy part of
the ordinary course of business for a life insurance company?
A life insurance policy is a relatively simple contract
between the insurer and the insured. In return for payment of
a premium, the insurer agrees to pay the benefits of the
policy to the beneficiary designated by the insured upon the
insured's death. It is only when the insured has failed
to make clear to the insurer who is to receive the proceeds
of the policy at his death that the insurer must hire a
lawyer and start a lawsuit to get the answer. For the vast
majority of policies issued by an insurer, such steps are not
necessary. It is only when its insured fails to make clear
his intentions when significant changes in his life
inevitably occur that an insurer is forced to incur the
additional expense of hiring a lawyer in order to meet its
obligations under the contract. While interpleader actions
are not uncommon, they are the exception and are hardly an
ordinary part of the business of life insurance companies.
More importantly, they are only needed when the insured fails
to clearly designate a beneficiary.
a significant fact to consider in deciding who should bear
the costs of instituting such an action. Even an apparently
simple interpleader action can be time-consuming and costly
to research and file, often for reasons beyond the insurance
company's control. Daniel E. Witte, Managing
Irresponsible Actors in Federal Interpleader Actions, 50
Tort Trial & Ins. Prac. L.J. 1, 42 (Fall 2014). For
instance, when an insured is careless and fails to clarify
his beneficiary designations after a divorce or remarriage,
or as in this case, enters into a divorce settlement
agreement that is vague and indefinite, the insurer is tasked
with identifying and providing notice to the necessary
individuals who may have a claim under the policy. The task
is further complicated when, as here, one of the potential
claimants is a citizen of a foreign country such as China.
Awarding the insured fees and expenses out of the policy
proceeds in such cases not only places the loss on the party
responsible for the confusion (or more accurately those
standing in the shoes of the person responsible), but it also
incentivizes insureds to make their beneficiary designations
clear and update them when significant changes in their lives
call them into question. Such a rule also incentivizes the
insurer to inquire into the legitimacy of the potential
claims, protect the integrity of the fund, and act in a
timely fashion. Wright & Miller, Federal Practice &
Procedure § 1719; see also John Deere Deferred
Savings Plan For Wage Employees v. Propst, No.
06-C-1235, 2007 WL 4594681, at *10 (E.D. Wis. Dec. 28, 2007)
(“[W]hen it is revealed that there is likely going to
be a substantive dispute between prospective beneficiaries so
as to raise the prospect of the need for an interpleader
action, additional research into the facts to prepare a
complaint and file an action will be necessary and should be
in determining whether to award attorney's fees in this
case, the court will consider the purpose of interpleader
actions as well as other equitable concerns, including
“(1) whether the case is simple or involved; (2)
whether the stakeholder performed unique services for the
claimants or the court; (3) whether the stakeholder acted in
good faith and with diligence; (4) whether the services
rendered benefitted the stakeholder; and (5) whether the
claimants improperly protracted the proceedings.”