2020 Georgia Code
Title 33 - Insurance
Chapter 25 - Life Insurance
§ 33-25-11. Cash Surrender Value and Proceeds of Life Insurance Policies and Annuity Contracts Not Liable to Attachment, Garnishment, or Legal Process in Favor of Creditors; Proceeds Becoming Part of Insured's Estate

1. Whenever any person residing in the state shall die leaving insurance on his or her life, such insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise. Whenever the insurance, by designation or otherwise, is payable to the insured or to the insured's estate or to his or her executors, administrators, or assigns, the insurance proceeds shall become a part of the insured's estate for all purposes and shall be administered by the personal representative of the estate of the insured in accordance with the probate laws of the state in like manner as other assets of the insured's estate.
2. Payments as directed in this Code section shall, in every such case, discharge the insurer from any further liability under the policy, and the insurer shall in no event be responsible for, or be required to see to, the application of such payments.
3. The cash surrender values of life insurance policies issued upon the lives of citizens or residents of this state, upon whatever form, shall not in any case be liable to attachment, garnishment, or legal process in favor of any creditor of the person whose life is so insured unless the insurance policy was assigned to or was effected for the benefit of such creditor or unless the purchase, sale, or transfer of the policy is made with the intent to defraud creditors.

(Ga. L. 1933, p. 181, § 1; Code 1933, § 56-905; Code 1933, § 56-2505, enacted by Ga. L. 1960, p. 289, § 1; Ga. L. 1982, p. 3, § 33; Ga. L. 2006, p. 885, § 1/HB 1304.)

- For annual survey on insurance law, see 64 Mercer L. Rev. 151 (2012). For article, "Consumer Bankruptcy Panel: Hot Consumer Bankruptcy Plan Issues," see 28 Emory Bankr. Dev. J. 333 (2012). For annual survey on bankruptcy law, see 64 Mercer L. Rev. 849 (2013). For annual survey of bankruptcy law, see 67 Mercer L. Rev. 819 (2016).

JUDICIAL DECISIONS

Scope of protection.

- O.C.G.A. § 33-25-11 more narrowly protects cash surrender value from "attachment, garnishment, and legal process," but does not purport to exempt it from all claims of creditors. Roach v. Ryan (In re Ryan), Bankr. (Bankr. S.D. Ga. Jan. 17, 2012).

Bankruptcy court did not err in concluding that O.C.G.A. § 33-25-11 did not provide the bankruptcy debtor an exemption from the bankruptcy estate because O.C.G.A. § 44-13-100 prevailed over the more general provisions of § 33-25-11. McFarland v. Wallace, 516 Bankr. 665 (S.D. Ga. 2014).

- O.C.G.A. § 33-25-11 does not apply when the policy has been fraudulently assigned with the intent to defraud creditors. Ambase Int'l Corp. v. Bank S., N.A., 196 Ga. App. 336, 395 S.E.2d 904 (1990).

This section creates no exemption of a debtor's property from execution, but rather a special cause of action for a creditor against one who is not the creditor's principal debtor. United States v. Truax, 223 F.2d 229 (5th Cir. 1955).

This section does not seek to protect the bankrupt, but the statute protects rights of beneficiary or assignee of the insurance policy from the creditors of the insured. In re Hausman, 209 F. Supp. 219 (M.D. Ga. 1962).

- O.C.G.A. § 44-13-100, by the statute's express terms, applies to bankruptcy debtors. By contrast, nothing in the history or language of O.C.G.A. § 33-25-11(c) indicates the legislature intended that statute to apply in bankruptcy; therefore, § 33-25-11(c) is unavailable for purposes of exempting property from a debtor's bankruptcy estate. In re Dean, 470 Bankr. 643 (Bankr. M.D. Ga. 2012).

- Bankrupt must claim the insurance policy as exempt property; the trustee is without power or authority to set aside as exempt property that which the bankrupt has not requested to be set aside. In re Hausman, 209 F. Supp. 219 (M.D. Ga. 1962).

Fact that claimant is "person so effecting" insurance on bankrupt does not remove claimant from the bounds of protection afforded beneficiaries and assignees of life insurance policies by this section, which removes persons effecting insurance on the life of another from the statute's protection only when such "person so effecting" the insurance is the debtor against whom creditors are seeking relief; the mere fact that the claimant happens to be the person who effected the insurance on the bankrupt's life does not disentitle the claimant to its proceeds as against the debtor's creditors. In re Hausman, 209 F. Supp. 219 (M.D. Ga. 1962).

- Named beneficiary in life insurance policy becomes vested with title to the insurance proceeds upon the death of the insured; thus, it would seem that malicious interference with the right of a named beneficiary to insurance proceeds would fall within the scope of tortious interference with contractual relations. It does not necessarily follow, however, that one commits a tort by bringing an action, regardless of the action's merit, in which claims are made to insurance proceeds for which another is the named beneficiary. Aetna Life Ins. Co. v. Harley, 365 F. Supp. 1210 (N.D. Ga. 1973).

Trial court erred in denying a term life insurance policy beneficiary's motion for summary judgment against the employer of the beneficiary's parent when the employer accused the parent of having obtained the policy from funds which the parent embezzled from the employer because O.C.G.A. § 33-25-11 precluded the claim of the employer from defeating the designated beneficiary to the proceeds of the life insurance policy and the fraud exception authorized by the statute was not applicable. McCrary v. Middle Ga. Mgmt. Servs., 315 Ga. App. 247, 726 S.E.2d 740 (2012).

When an investor asserted fraudulent transfer and related claims against the beneficiaries of a life insurance policy on the life of a deceased consultant who allegedly defrauded the investor, the claims were properly dismissed because: (1) under O.C.G.A. § 33-25-11(a), which was vague, the investor was a "creditor," as the term was used in the statute; and (2) the statute insulated life insurance proceeds from the creditors' claims. Speedway Motorsports, Inc. v. Pinnacle Bank, 315 Ga. App. 320, 727 S.E.2d 151 (2012).

O.C.G.A. § 44-13-100 prevails over O.C.G.A. § 33-25-11. - O.C.G.A. § 44-13-100 is the statute specific to bankruptcy exemptions and therefore that statute prevails over the more general provisions of O.C.G.A. § 33-25-11; the Georgia General Assembly drafted the exemption statute, § 44-13-100, specifically with bankruptcy in mind. In doing so, the General Assembly struck the intended balance between allowing a debtor in bankruptcy to exempt a limited amount of property in exchange for receiving a bankruptcy discharge; in striking this balance, the General Assembly limited the aggregate exemption in such policies to $2,000. In re Sapp, Bankr. (Bankr. S.D. Ga. June 15, 2012).

RESEARCH REFERENCES

Am. Jur. 2d.

- 44 Am. Jur. 2d, Insurance, §§ 719 et seq., 809.

- 46A C.J.S., Insurance, § 1967.

- Refusal of insurer to consent to change of beneficiary in life policy as affecting right of trustee in bankruptcy of insured, 20 A.L.R. 256.

Rights and remedies of beneficiary after death of insured who had pledged policy to secure debt, 83 A.L.R. 77; 160 A.L.R. 1389; 91 A.L.R.2d 496.

Insurable interest of creditors in debtor's life as affected by discharge in bankruptcy or insolvency, or expiration of period of limitation as regards debt, 91 A.L.R. 876.

Validity, construction, and effect of by-law, statute, or other provision of life insurance contract which prevents payment to creditor of insured or beneficiary, 92 A.L.R. 911.

Retroactive effect of statute relating to exemption of proceeds of life or benefit insurance, 92 A.L.R. 1388.

Exemption of property purchased with exempt proceeds of insurance, 96 A.L.R. 410.

Validity and enforceability of promise by beneficiary of life insurance to insured to pay proceeds, in whole or part, to third person, 102 A.L.R. 588.

Accident insurance as life insurance within exemption law, 111 A.L.R. 61.

Statutory limitation of amount of proceeds of life insurance payable to estate or representatives of insured which is exempt from debts of insured as affected by fact that insured had a policy payable to another beneficiary, 141 A.L.R. 893.

Proceeds of life insurance left with insurer after maturity of policy as subject to claims of creditors of beneficiary, 164 A.L.R. 914.

Right of creditors of life insured as to options or other benefits available to him during his lifetime, 37 A.L.R.2d 268.

Testamentary direction for payment of debts or expenses of administration as affecting life insurance proceeds payable to estate, 56 A.L.R.2d 865.

Enforceability, in forum, of extraterritorial waiver of debtor's exemption valid where made, 60 A.L.R.2d 1449.

Qualification of life insurance proceeds held by insurer for federal estate tax marital deduction, 78 A.L.R.2d 1029.

What constitutes state or local law that is applicable on date of filing of bankruptcy petition for purposes of applying 11 U.S.C.A. § 522(b)(3)(A) or its predecessor in opt-out states, 76 A.L.R. Fed. 2d 333.