Robert Lee v. West Coast Life Insurance Co.

This case, which involves a dispute over the proceeds of a life insurance policy, raises the following issue: Does the federal interpleader remedy shield a negligent stakeholder from tort liability for its creation of a conflict over entitlement to the interpleaded funds? We hold that it does not, and that a claimant may seek to recover all damages directly and proximately caused by the negligent stakeholder’s conduct.

I.

A.

On March 13, 1998, West Coast Life Insurance Company (“West Coast”) issued a life insurance policy with a death benefit of $800,000 to the late Steve Lee, Sr. Steve Sr. was the original owner of the policy. William Lee, Steve Sr.’s brother, was the original beneficiary. In the subsequent years, West Coast received numerous change of ownership and beneficiary forms from members of the Lee family. At issue is a policy change form signed and executed in July 2005, purporting to change the ownership and beneficiaries of the policy to Robert Lee, Bobbie Bill Lee, and Steve Lee, Jr. Bobbie and Steve Jr. are Steve Sr.’s nephews. Robert is Steve Sr.’s grandson.

Robert, Bobbie, and Steve Jr. executed the aforementioned change forms in West Coast’s San…