Interpleader Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Interpleader, written in plain English, along with examples of how it is used.

What is Interpleader?

An Interpleader is given the job when two or more parties claim to be the owner of money or property that is owed by some third party. That third party normally deposits the fund with the court as per the instruction of the interpleader and will be free of an legal action or party of lawsuit.Now to determine who the real owner of the propoerty or money is the process of the interpleader.

History and Meaning of Interpleader

Interpleader has a long history in common law jurisdictions, dating back to at least the 16th century in England. It was originally developed as a way for debtors to avoid being sued by multiple creditors for the same debt. Instead of having to defend against multiple lawsuits, the debtor could deposit the disputed funds with the court and let the creditors fight amongst themselves to determine who had the right to the funds. Today, interpleader is still used in this context, as well as in a variety of other situations where two or more parties claim ownership of the same funds or property.

Examples of Interpleader

  1. A bank holds $100,000 in a joint account owned by two people who are now in a dispute over who is entitled to the money. The bank files an interpleader action with the court to deposit the funds and let the parties litigate the issue.
  2. A life insurance company receives competing claims from three different parties who believe they are entitled to the proceeds of a policy. The company files an interpleader action and deposits the funds with the court.
  3. An employer is sued by two former employees who both claim they are owed commissions from the same sale. The employer files an interpleader action and deposits the disputed funds with the court.

Legal Terms Similar to Interpleader

  1. Subrogation - the right of an insurer to step into the shoes of its insured and sue a third party who may be liable for a loss.
  2. Contribution - a legal doctrine that allows multiple parties who are jointly liable for a debt to share the burden of paying that debt.
  3. Declaratory Judgment - a court order that declares the rights and obligations of parties to a dispute without actually awarding damages or other relief.