Opinion ID: 2981841
Heading Depth: 3
Heading Rank: 3

Heading: Duty to Claim Exemption

Text: Plaintiff next argues that even if Travelers did not breach the Agreement, it had a duty to stop the garnishment of the MetLife annuity by claiming an exemption under Ky. Rev. Stat. § 425.501. Plaintiff relies on J.G. Wentworth for his argument, stating that the case stands for the propositions: “(1) that tort victims retain no interest susceptible of assignment in structured settlement annuity payments; (2) that such payments by insurance companies are exempt from garnishment pursuant to state code and public policy; and (3) an insurer issuing such an annuity faces a justiciable controversy and as such has standing to assert that the annuity proceeds are exempt from execution.” (Appellant Br. at 10.) From this, Plaintiff argues, Travelers had a duty to assert that the annuity proceeds are exempt from execution of the garnishment order. Defendants argue that while they may have had standing to assert the exemptions under Ky. Rev. Stat. § 425.501 and J.G. Wentworth, they did not have a duty to do so. (Appellee Br. at 27.) Primarily, Defendants maintain that the law in Kentucky has always been that only a judgment debtor, in this case Colyer, may claim such an exemption. (Id. at 24.) 10 Under Ky. Rev. Stat.§ 425.501, a judgment debtor “may appear and claim the exemption of any property or debt that is exempt from execution, and on proof of exemption the garnishment shall be discharged as to the exempt property or debt.” Ky. Rev. Stat. § 425.501(4). Further, [i]f the court finds that the garnishee was, at the time of service of the order upon him, possessed of any property of the judgment debtor, or was indebted to him, and the property or debt is not exempt from execution, the court shall order the property or the proceeds of the debt applied upon the judgment. Ky. Rev. Stat. 425.501(5). Annuities payable to judgment debtors are exempt from garnishment at a rate of up to $350 per month. Ky. Rev. Stat. § 304.14-330(b). If the annuity payments total more than $350 per month, then the court may order such annuitant to pay a judgment creditor or apply on the judgment, in installments, such portion of such excess benefits as to the court may appear just and proper after due regard for the reasonable requirements of the judgment debtor and his family, if dependent upon him, as well as any payments required to be made by the annuitant to other creditors under prior court orders. Ky. Rev. Stat. § 304.14-330(c). Kentucky courts have generally interpreted Ky. Rev. Stat. § 425.501 to mean that exemptions to garnishment orders may only be claimed by the judgment debtor and “not by another for his benefit.” Central Supply of Virginia, Inc. v. Commonwealth Life Ins. Co., 787 S.W.2d 273, 274 (Ky. Ct. App. 1990). In J.G. Wentworth, however, the Kentucky Court of Appeals held that the owner of an annuity, payable to a judgment debtor, had standing to claim an exemption under Ky. Rev. Stat. § 425.501 and § 304.13-330 on behalf of the judgment debtor. J. G. Wentworth, 28 S.W.3d at 316. In that case, the court distinguished Central Supply of Virginia’s rule on standing because the owner of the annuity was not faced with a single payment of insurance but an “ongoing barrage of continuing garnishments.” Id. J.G. Wentworth may stand for the proposition that Travelers could 11 have standing to claim an exemption from the garnishment of the annuity payments to Colyer in this case. Though the facts of J.G. Wentworth are vastly different than in this case, Travelers would have been subject to “continuing garnishments” over the time it would have taken for Colyer’s debt to Carroll to be paid back. However, we need not decide this issue. Plaintiff’s argument does not simply ask the court to hold that Travelers had standing to claim an exemption on his behalf. Plaintiff insists that a garnishee’s having standing to claim an exemption to a garnishment order creates a duty to claim such an exemption. (Appellant Reply Br. at 7.) However, having standing to assert a claim does not create a duty to assert that claim. Plaintiff offers no supporting cases for his proposition, but implies that one follows from the other. We have not found any Kentucky law standing for this proposition. Nothing in the J.G. Wentworth opinion indicates that the court in that case intended to create such a duty. In addition, Plaintiff argues in reply that even if Travelers did not have a duty to claim an exemption on his behalf, it did have a duty to determine whether the property sought to be garnished belonged to him in the first place. (Id. at 8.) However, Plaintiff again offers no support for this proposition. Accordingly, we affirm the district court’s granting of summary judgment to Defendants on the issue of whether Travelers had a duty to claim an exemption to the garnishment of his annuity payments.