Failing to Disclose Long Term Disability Claim in Bankruptcy Does Not Bar Participant from Recovery

Many Chicago area employees participate in a long term disability insurance plan through their employers. Complications often arise when the employee can no longer work, but his claim for long term disability is denied and he must appeal and possibly sue to recover the benefits. Sometimes, the process can take a significant amount of time to resolve, and it is not uncommon for employees pursuing these disability benefits to encounter financial struggles along the way, including foreclosure of a mortgage, and possibly bankruptcy. The question often arises whether what you disclose in the bankruptcy proceeding can affect your rights to the long term disability insurance benefits. The Sixth Circuit Court of Appeals recently addressed this question.

In Javery v. Lucent Technologies, Inc., a software engineer stopped working and claimed long term disability benefits. He supplied ample evidence that his physical limitations, and effects of the medications he was taking, made him unable to meet the technically and intellectually demanding elements of his occupation, and unable to sit for prolonged periods in order to perform that occupation. The physical and mental conditions made it extremely difficult for him to concentrate, handle the stress of the job, and even stay awake.

On appeal, the plan argued that when Mr. Javery filed for bankruptcy, he did not disclose his claim for long term disability insurance benefits, and under the doctrine of judicial estoppel, he should be barred from receiving those benefits. The Sixth Circuit Court of Appeals rejected that argument, concluding there was no evidence this omission was intentional, or contained any element of strategic concealment or gamesmanship. Instead, it appeared to be no more than a careless or inadvertent error that should not bar Javery from recovering benefits to which he is entitled.

If you are a current or former employee claiming long term disability benefits under an employer-sponsored disability insurance policy, contact a knowledgeable ERISA lawyer to determine your rights under the policy.