This case involves a narrow issue of Georgia law concerning whether an insured mortgagor has a legal interest in a credit disability insurance policy. Because the district court erroneously relied on vitiated Georgia case law, we reverse the district court's grant of summary judgment in favor of the insurer.

In 1974 appellant M.C. Walker purchased property in Albany, Georgia. Pursuant to the financing arrangement with Southwestern Mortgage Company, appellant became eligible for and received group mortgage disability insurance under a credit policy issued by Continental Casualty Company. Appellee Omaha Mutual Indemnity Company subsequently assumed appellant's policy.

In March, 1983 appellant was injured when a tree fell on his back. Because he became disabled and unable to work, appellant applied for benefits under the policy. Appellee made payments from April, 1983 to February, 1984, and then again from May, 1984 to August, 1984. Appellee made no further disability payments and as a result appellant was unable to make his mortgage payments. In November, 1984 appellant lost his house and property through foreclosure.

After removing appellant's subsequent state court action to federal district court, appellee moved for summary judgment on the grounds that appellant had no interest in the policy to maintain an action, or, in the alternative, that appellant's action was barred as a result of his failure to submit certain disability reports. The district court, relying on Murray v. Life Insurance Co. of Georgia, 107 Ga.App. 545, 130 S.E.2d 767 (1963), granted summary judgment on the first ground.

In Murray the Court of Appeals of Georgia held that the purpose of a group creditors insurance policy was to provide the creditor mortgagee "with security for its outstanding loans by paying it the balance of indebtedness owed thereon in the event of the death or disability of the debtors." 130 S.E.2d at 769. The court concluded therefore that any cause of action on the policy was vested in the creditor, not the debtor. Id.

The new Georgia Insurance Code and subsequent case law quickly and drastically undermined the holding in Murray. In Betts v. Brown, 219 Ga. 782, 136 S.E.2d 365 (1964), the Georgia Supreme Court explained that the new insurance statutes, now Ga.Code Ann. Sec. 33-31-7,1 recognized and sought to "protect the interest of the insured debtor in the credit life insurance." 136 S.E.2d at 368.2 In holding that an insured's widow's claim stated a cause of action against a third party who had agreed to assume the indebtedness, the court disapproved if not virtually overruled Murray. The court explained:

The credit life insurance contract dealt with in Murray v. Life Ins. Co. of Ga., 107 Ga.App. 545, 130 S.E.2d 767, was entered into prior to the effective date of the Georgia Insurance Code, Ga.L.1960, supra. Hence, what was there held as to the insured's lack of interest in that contract and consequent inability to sue the insurer for breach thereof was not with the aid of the above mentioned Insurance Code provisions, which recognize the interest of the insured in the credit life insurance contract.

Id. at 369.

One year later the Court of Appeals stated that Murray was not applicable to credit life insurance contracts entered into after the effective date of the new insurance code. Pioneer Homeowners Life Ins. Co. v. Hogan, 110 Ga.App. 887, 140 S.E.2d 212, 213 (1965) (citing Betts, 136 S.E.2d at 369). In Hogan the court specifically addressed the insurance company's contention that "a policy of credit life insurance is wholly for the benefit of the creditor beneficiary and the sole right of action to recover on such policy is therefore in the creditor beneficiary to the exclusion of the insured debtor...." 140 S.E.2d at 213. The court explicitly held: "This contention is without merit." Id.; see also Robinson v. Volunteer State Life Ins. Co., 175 Ga.App. 292, 333 S.E.2d 171, 172 (1985) (credit insurance is by statute intended for benefit of debtor as well as creditor); Knowles v. Knowles, 125 Ga.App. 642, 188 S.E.2d 800, 804 (1972) ("payment of proceeds of credit life insurance inures to the benefit of the insured"); Universal Am. Life Ins. Co. v. Finance Corp. of Am., 118 Ga.App. 160, 162 S.E.2d 813, 814 (1968) (1960 Credit Insurance Act of Georgia was enacted for the benefit of both insured borrower and creditor).

Appellee cites several Georgia cases in an effort to demonstrate that Murray is still a vibrant part of Georgia jurisprudence. While we agree with appellee that Murray continues to survive as support for certain propositions, the strong and disapproving language of Betts and Hogan compel us to conclude that in this case Murray is not controlling.

Appellee cites, for example, Voyager Life & Health Ins. Co. v. Pulaski Banking Co., 181 Ga.App. 201, 351 S.E.2d 725 (1986), and Sherrill v. Louisville Title Ins. Co., 134 Ga.App. 322, 214 S.E.2d 410 (1975), as support for its position. The court in Voyager Life, however, merely held that the plaintiff creditor bank had sufficient financial interest in a credit life insurance policy to maintain an action against a third party bank for indemnification, not that the debtor insured had no interest. See 351 S.E.2d at 727. In Sherrill, the court rejected the contention that the borrower could sue a title insurer on a mortgage title policy under a third party beneficiary theory. See 214 S.E.2d at 411. Because the Georgia legislature has placed insureds under credit insurance policies in a special category of protection, see Betts, 136 S.E.2d at 368, Sherrill is clearly distinguishable.3

The district court in this case relied exclusively on a principle which has been repudiated by the legislature and the courts of Georgia. The district court's grant of summary judgment on the basis of this principle was erroneous.4

REVERSED and REMANDED.