In 2004, Speedway hired Oasis Trading Group, of which David Blihovde was a member, to provide consulting services about opportunities in the petroleum products business. Beginning in 2006, Blihovde allegedly sent fraudulent invoices to Speedway and misappropriated the payments. By 2010, Blihovde allegedly had obtained more than $5 million from Speedway by fraud.
In 2007, Blihovde obtained a policy of insurance on his life. When Blihovde died in 2010, the insurer paid the death benefits to Blihovde’s designated beneficiaries, who were his former wife, Deborah, his two adult children by Deborah, and a minor child by a subsequent marriage.
In a lawsuit involving multiple claims against multiple parties, Speedway sued Deborah and the two adult children, asserting that they had been unjustly enriched by their receipt of the death benefits, and that Speedway was equitably entitled to the proceeds of the policy, at least up to the amount of premiums paid with funds that Blihovde had acquired by fraud.
The trial court dismissed the complaint, relying on O.C.G.A. § 33-25-11(a), which provides:
Whenever any person residing in this 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.
Speedway argued in the trial court and on appeal that it was not a "creditor," as that term was used in the statute, because, as the unwitting victim of fraud, it never voluntarily undertook to extend credit to Blihovde.
The Georgia Court of Appeals said that the term "creditor" appears in several sections of the Georgia Code, "but it does not always have precisely the same meaning." Its "generic meaning," the court said, "refer[s] to any person to whom another ‘is liable and bound to pay … an amount of money.’" In its "more circumscribed and ordinary meaning," the term "creditor" refers to "the holder of an obligation arising [by contract]."
The court reviewed previous versions of what is now § 33-25-11(a), back to the Code of 1933, all of which used the term "creditors," and affirmed the trial court’s dismissal of Speedway’s claim. "Given this statutory history," the court said, "and given our conclusion that the 1933 statute, to which the current statute traces its lineage, used ‘creditor’ in the ‘generic sense,’ including voluntary and involuntary creditors alike, we conclude that Speedway is a ‘creditor,’ as that term is used [in the statute]."
The court acknowledged Speedway’s argument that its construction of the statute might give "thieves and fraudsters an incentive to launder the proceeds of their wrongdoing through life insurance," but concluded that this concern was outweighed by considerations of public policy.
"There are competing policy interests that are furthered by [the statute]," the court said, "including the policy interest in providing certainty for insurers about the persons to whom proceeds of policies should be paid, as well as the policy interest in ensuring that the beneficiaries of life insurance – for some of whom the life insurance proceeds may represent the only valuable asset that the insured has left for their care – promptly receive the proceeds of the policy. It is to further these interests that the General Assembly appears to have written the current version of the statute as it did …."
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