Just three weeks before actor Heath Ledger is expected to win a best supporting actor Oscar for his role in The Dark Knight, a lawsuit has been settled entitling the actor’s daughter Matilda to benefit from a $US10 million (£7 million) life insurance policy taken out by the actor.

The lawyer representing three-year-old Matilda, William Shernoff, today said ReliaStar Life Insurance Company had agreed to settle the lawsuit filed last year on behalf of the toddler.

The suit claimed that ReliaStar, owned by global banking giant ING, had refused to honour the policy because it asserted that Ledger's death could have been a suicide.

William Shernoff, who represents Matilda and John S. LaViolette, Ledger’s former lawyer who filed the suit, said a confidential settlement had been reached and that the parties were pleased with the settlement.

Mr Shernoff declined to tell reporters how much Matilda would receive given a confidentiality clause under the settlement.

Ledger, best known for his moving portrayal of a gay cowboy in the 2005 film Brokeback Mountain, took out the $US10 million life insurance plan in June, 2007, and made his sole child Matilda the beneficiary.

The Australian actor died on January 22 last year, aged 28, after consuming a cocktail of prescription painkillers and sleeping pills.

An autopsy by the New York Medical Examiner's Office declared the death an accidental overdose despite speculation it could have been a suicide.

Despite the finding by the New York coroner, ReliaStar decided to investigate the cause of Ledger’s death. Insurance companies can draw their own conclusion on a cause of death regardless of what the law or a coroner says. If suicide is found, insurers can deny liability.

Last week the late actor received his second Oscar nomination, for his role as The Joker in the Batman film The Dark Knight. He has won numerous honours, including Golden Globe and Screen Actors Guild awards, for the role during the current film awards season and is favoured to take home the Oscar for best supporting actor at next month's Academy Awards.

An LA court is expected to approve the settlement on February 23, the day after the Oscar’s ceremony.

Matilda lives with her mother, the US actress Michelle Williams, in New York.

Last week, as Ledger received his second Oscar nomination on the anniversary of his death, his Australian family said Williams was doing well as a single mum.

"Michelle is doing an amazing job with 'our girl,' and together we will cherish every moment of her steps through life," Ledger's sister Kate said of the three-year-old.

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