In re Tober

Arizona law allows a debtor to exempt “the cash surrender value of [certain] life insurance policies” and annuity contracts from execution, attachment or sale when the beneficiary is a “surviving spouse, child, parent, brother or sister,” despite the beneficiary not being a dependent of the debtor.

These two cases reached the Court on appeal from a single order by the Ninth Circuit Bankruptcy Appeals Panel (BAP) that reversed the lower bankruptcy court. The BAP order held that the Arizona exemption allowing a debtor to exempt the cash surrender value of life insurance policies and annuity contracts requires that the beneficiary be a family member and a dependant of the debtor. However, upon reviewing the cases de novo, the court found significance in the statutory language that included an “or” that separating the allowance for a family member from other “any other dependant family member.” The court determined that this choice of construction broadens the qualifying family members to those who are among those listed (brother, sister, etc.) or those who are simply dependant. The court concluded that the BAP and Trustees’ interpretation of the language would render the statute’s list of specific family members superfluous, and that result would contravene well-settled precedent. The Trustee’s related arguments grounded in statutory interpretation were not well taken by the court. REVERSED and REMANDED.