Opinion
Case No. 2:14-bk-55829
03-11-2015
IN RE: LUCY J. EVERHART Debtor.
Chapter 7
ORDER SUSTAINING TRUSTEE'S OBJECTION TO CLAIMS OF EXEMPTION AND AMENDED CLAIMS OF EXEMPTION IN GERBER GROW UP POLICY
This cause came on for hearing on December 2, 2014, upon the Objection to Claims of Exemption and Amended Claims of Exemption of Debtor in Gerber Life Grow-Up Policy (the "Objection to Exemption") (Doc. #16), filed by the Chapter 7 Trustee, William B. Logan (the "Trustee"), and the Response to Trustee's Objection to Exemption (the "Response") (Doc. #18), filed by the Debtor, Lucy J. Everhart. The Trustee asserts that the Debtor's claim of exemption in the Gerber Life Grow-Up Policy does not fall within the parameters of Ohio's exemption statutes.
I. JURISDICTION
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).
II. FACTS
The facts material to this dispute are uncontested and may be summarized as follows: The Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code on August 18, 2014. At this time, the Debtor filed a Schedule C (Doc #1) on which the Debtor claimed as exempt her interest in a Gerber Life Grow-Up Policy (the "Policy") in the amount of $2,213.00. Although the Parties did not describe it, the Policy is "whole life insurance for a child that builds cash value." The Gerber Life Grow-Up Plan, https://familyfirst.gerberlife.com/growup_ms (last visited Mar. 10, 2015). The Debtor cited Ohio Revised Code §§ 2323.66(A)(6)(b), 3911.10, 3911.12, and 3911.14 in support of the exemption. On September 30, 2014, the Debtor filed an Amended Schedule C (Doc. # 14); the Debtor's claim of exemption in the Policy remained the same. The Debtor is the owner and beneficiary of the Policy, and the Debtor's child is the insured person under the Policy.
On October 9, 2014, the Trustee filed the Objection to Exemption (Doc. #16) in which the Trustee asserted that the statutes cited do not authorize exemption of the Policy.
III. ARGUMENTS OF THE PARTIES
The Trustee objects to the claimed exemption on the basis that the Policy does not fall within the exemption articulated in the applicable statute. The Policy is owned by the Debtor, the insured person is the Debtor's child, and the Debtor is the beneficiary of the policy. In this vein, the Trustee argues that the statute looks to whether the beneficiary of the policy is a dependent of the insured person, which would mean that the Debtor must prove that she is a dependent of the insured person, in this case, the child. On the other hand, the Debtor argues that she is dependent upon herself, thus falling within the contours of the statute. The Debtor notes that she took out the insurance policy to pay for potential funeral costs that she would not be able to afford. At the hearing, the Debtor conceded that she relies solely on Ohio Revised Code § 3911.10, abandoning any argument based on other statutes initially cited in support of the exemption claimed.
IV. LEGAL ANALYSIS
Section 2329.66 of the Ohio Revised Code sets forth in general the exemptions available under Ohio law. Specifically, § 2329.66(A)(6)(b) states, in pertinent part: "Every person who is domiciled in this state may hold property exempt...as follows:...The person's interest in contract of life-insurance or annuities, as exempted by section 3911.10 of the Revised Code." Ohio Rev. Code § 2329.66(A)(6)(b). In turn, § 3911.10, in pertinent part, states the following regarding exemption of life insurance policies from claims of creditors:
All contracts of life...insurance or annuities upon the life of any person, or any interest therein, which...have been taken out for the benefit of...the spouse or children, or by any persons dependent upon such person...shall be held, together with the proceeds or avails of such contracts, subject to a change of beneficiary if desired, free from all claims of the creditors of such insured person or annuitant. Ohio Rev. Code § 3911.10 (emphasis added).
The United States Bankruptcy Appellate Panel of the Sixth Circuit has explained that § 3911.10 involves three key elements. In re Schramm, 431 B.R. 397, 402 (B.A.P. 6th Cir. 2010). First, the contract at issue must in fact be a "proper type of insurance policy or annuity." Id. Second, the contract must be on the life of the insured person. Id. Third, the contract must be for the benefit of the insured's spouse, children, or dependents. Id. (Emphasis added.) If these three elements are satisfied, then the contract of life insurance or annuities, as well as any proceeds or avails from said contract or annuities, will be exempt from claims of the insured person's or annuitant's creditors. Id. Importantly, the B.A.P. noted that "[s]ection 3911.10 only protects an insurance policy and its proceeds from the claims of the creditors of the insured person." Id. (Emphasis added.)
In the instant case, it is undisputed that the Debtor is both the owner of the Policy as well as the beneficiary. It is also clear that the Debtor's child is the person insured under the Policy and that the Creditors in this case are creditors of the Debtor, not of the Debtor's child. Because § 3911.10 only protects the Policy and its proceeds "from the claims of the creditors of the insured person," the Policy is not exempt under § 3911.10.
Furthermore, it is irrelevant whether or not the Debtor is, as she argues, dependent upon herself. In § 3911.10, the phrase "any persons dependent on such person" refers to the person insured under the Policy, namely, the child. However, even if the Debtor were a dependent of her child or herself, § 3911.10 is clear that the Policy is exempt only from the "claims of creditors of the insured person." As such, the Debtor's argument that the word "dependent" does not necessarily refer to one's spouse or child is immaterial to the case at hand. Accordingly, the Policy fails to meet the terms of the applicable statute, and the Trustee's Objection to Exemption must be sustained.
V. CONCLUSION
In light of the foregoing, it is ORDERED and ADJUDGED that the Trustee's Objection to Exemption is sustained and the Debtor's claim of exemption in the Policy is disallowed.
IT IS SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/ _________
C. Kathryn Preston
United States Bankruptcy Judge Dated: March 11, 2015 Copies to: Default List