Oklahoma Bar Journal

Interpleaders – How a Plaintiff’s Attorney Can Use Them Effectively

By Ashley Leavitt

Ashley Leavitt

Interpleader. Did you shudder? Interpleaders are not as scary as they are often perceived. Black’s Law Dictionary describes an interpleader action as “a suit to determine a right to property held by a usually disinterested third party who is in doubt about ownership and who therefore deposits the property with the court to permit interested parties to litigate ownership.” Simply put, an interpleader is a tool to use when the insurance settlement does not cover all the damages in a case.

While every plaintiff’s attorney would ideally choose to have their clients compensated for all medical expenses, lost wages, pain and suffering and other damages in addition to the attorney fee at or within the policy limits of the tortfeasor’s insurance policy, that is quite often not possible. In a situation where the plaintiff’s damages outweigh the applicable insurance coverage, the plaintiff’s attorneys are left with few choices.

One of those choices would be to attempt to obtain reductions from the medical providers, cut your own fee and distribute the funds yourself, which can be a lot of work as well as back and forth with all parties involved. Another option would be to file an interpleader action and have the court divide up the settlement. While the second option may sound expensive and time intensive, rest assured it often resolves claims more quickly and with less hassle than by begging for reductions from providers, waiving the attorney fee or letting the case sit around and keep you awake at night. There are seven simple steps to resolving a client’s claim with an interpleader.



To begin, file a petition for interpleader in the county where the incident occurred1 or if the suit has already been filed in the matter, move to amend the petition with permission of the adverse party and save by not paying an additional filing fee.2



Notice must then be sent to all lienholders by certified mail. To guard against a potential appeal, notice should also be sent by certified mail to all medical providers with outstanding balances – regardless of whether they have filed a lien.3 A lien can be filed quickly, and a lienholder can have standing to appeal any order in the case within 30 days of the filing of the order.4 However, providing prior notice of the action and hearing to all medical providers before any order is entered will reduce both the chance of appeal and likelihood of the order being overturned.

Additionally and practically speaking, it is a benefit to the plaintiff’s bar to have medical providers who are willing to treat claimants and hold the balance. Each time a plaintiff’s attorney distributes funds without including a medical provider in the disbursement, it becomes a bit less likely that the medical provider will continue to treat patients without payment upfront. Clearly, this will result in less treatment for injured claimants and lower settlements in the future.



After all the providers and lienholders have been notified of the interpleader action, file a motion to determine liens to obtain a court date and submit the motion to the judge with a proposed order setting the date. While it is not a rule or requirement in Oklahoma to file a proof of notice to each provider and lienholder with the court, it does assure the court that due diligence has been taken and includes the notice as part of the record should any party attempt to appeal the final order. After obtaining the order for hearing, again notify all the providers and lienholders of the hearing date and retain proof of each notice. Often by this point, the providers will have retained attorneys who will have filed an entry of appearance, which makes providing notice a lot easier and a lot less expensive. After the hearing is set and the interested parties are notified, begin to draft the order of disbursement.



Having the order of disbursement drafted prior to the hearing will make the hearing a whole lot easier and could potentially avoid attending a hearing altogether.

Warning: we are about to talk about math, and we all know that lawyers went to law school because they don’t like math.

Warning aside, this math is pretty simple. From the total settlement, first deduct the expenses and then the attorney fee. The expenses are the costs involved in the case, including the filing fee, the charges for certified mail and any other expenses the firm may have incurred to obtain the settlement offer from the insurance carrier, such as postage or medical records. The attorney lien is pursuant to the contract you have with your client. Under the laws of Oklahoma, an attorney fee may not exceed 50% of the net proceeds of any compromise.5 Further, net is defined as the balance of a settlement after litigation expenses are paid.6

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After the expenses are deducted from the total settlement, the attorney lien percentage is taken out. The remainder is to be divided equitably among the lienholders,7 and all medical liens must be satisfied in full before the plaintiff is entitled to any of the settlement proceeds.8 This means that in the most basic case, all outstanding liens are added up and then the remainder of the settlement is divided by the total amount of liens. This will result in a decimal number that converts to a percentage. Then find each provider’s pro rata share by taking their outstanding balance and multiplying it by the percentage. Done and done.

However, not all interpleaders are quite this easy. There are a few instances when one or more liens have priority over the rest. Any lien by the Oklahoma Health Care Authority (OHCA/SoonerCare) is superior to all other liens except an attorney’s lien.9 Similarly, Medicare makes conditional payments when an individual has an insurance claim and is also paid in full before any provider.10 There are additional health insurance companies that hold superior liens to medical providers such as CHAMPUS/Tricare11 and ERISA policies which are most often found when an individual is on a group plan through their employer.12 Should a case involve any of these liens, their amount will come out after the expenses and attorney lien, and the remainder will be divided pro rata among the remaining lienholders.



 If all parties have retained an attorney, circulate the proposed order for disbursement to the attorneys who have entered an appearance on behalf of the lienholders. If a lienholder has not obtained an attorney prior to the hearing date, they will forfeit any pro rata share of the disbursement. That is, if a lienholder wants to participate in the disbursement, they must hire an attorney.13 A lienholder may not represent itself pro se as “[a] corporation is not a natural person.14 It is an artificial entity created by law, and as such it can neither practice law by appearing in propria persona nor act in person by an officer who is not an attorney.”15

It is important to remember the other attorneys involved are looking out for the interests of their clients and will help you determine priority, if there is any, as well as check the math. While it is good practice for the plaintiff’s counsel to prepare a proposed order, there are other professionals overseeing their work, and together you will be able to submit an agreed order to the judge that is in line with each of your collective clients’ interests.



There are a few ways to obtain and distribute the settlement funds after an interpleader, but it mostly comes

down to the preference of the plaintiff’s attorney and/or the tortfeasor’s insurance carrier. First, the insurance carrier could deposit the funds to the clerk of the court to distribute upon the filing of the order of disbursement.16 This option is not often used when the plaintiff’s counsel is agreeable to the interpleader. Second, the insurance carrier could wait to be provided with a file-stamped copy of the order of disbursement and can issue checks as ordered, either directly to the parties, or by sending all individual checks to the plaintiff’s attorney for distribution. Third, the insurance company could issue a single check to the plaintiff’s attorney for the full amount of the settlement and rely on the plaintiff’s attorney to cut individual checks. While this is common, it should be noted the insurance company will likely include all

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lienholders and payees on the single check. To avoid the need for obtaining each individual payee’s limited power of attorney to endorse the check prior to putting it in your firm’s IOLTA and distributing, language such as “plaintiff’s counsel has the limited power of attorney to endorse the back of the settlement check(s) for any/all persons, entities, and/or listed payees on the proceeds paid by the liability insurance carrier” should be included in the order of disbursement.



After the order has been filed, the checks have been cut and the funds have been distributed, the final step of resolving a client’s claim with an interpleader is to file a dismissal with prejudice to close the active case. Unlike a typical civil lawsuit, interpleader actions can be opened and closed within just a few months.

An interpleader can often resolve a claim more quickly than obtaining reductions from medical providers, as reductions are a courtesy. There is no deadline for a medical provider to respond to a reduction request, and there is rarely an incentive for them to accept a reduction. However, setting a hearing on a motion to determine liens gives the provider a deadline to be included in the disbursement. Further, an interpleader ensures the provider will hire an attorney who understands the law and court process, which ensures the plaintiff’s attorney has much less explanation to provide. Finally, an interpleader provides protection if there is ever a question as to the disbursement of the settlement proceeds in the future. Producing a copy of the court’s order and matching payments will alleviate the question of why a certain provider was or was not paid.

For all of these reasons, filing an interpleader with the court can lessen the burden of stretching a settlement for the plaintiff’s attorneys, and anything that lessens the burden is worth learning.



Ashley Leavitt is an associate attorney with Koller Trial Law in Tulsa. A graduate of the TU College of Law, her practice consists of civil litigation for personal injury, bad faith and victims of crime.

  1. 12 O.S. §2022.
  2. 12 O.S. §2015(A).
  3. 42 O.S. §§43, 46, 49.
  4. 12 O.S. §993.
  5. 5 O.S. §7.
  6. State of Okla ex rel Okla Bar Assn. v. Watson, 1994 OK 32, 897 P 2d. 246, 252 (Okla. 1994).
  7. Burchfield v. Bevans, 242 F.2d 239 (10th Cir. 1957).
  8. 42 O.S. §§43, 46, 49; State ex rel Dept. of Human Srvcs v. Allstate, 1997 OK 91, 744 P.2d 186 (Okla. 1987).
  9. 63 O.S. §5051.1(D)(1)(a).
  10. 42 U.S.C. §1395y.
  11. 32 C.F.R. §220.11.
  12. 29 U.S.C §1101 et seq.
  13. Masongill v. McDevitt, 1989 OK CIV APP 82.
  14. Id.
  15. Id. at ¶8.
  16. 12 O.S. §2022(C).

Originally published in the Oklahoma Bar Journal – OBJ 92 Vol 6 (August 2021)