The case of Dawna Lane v. Prudential Insurance Company is limited to a discussion by the Utah Federal District Court about whether or not Plaintiff’s ERISA lawsuit for long term disability benefits should be dismissed on the grounds of judicial estoppel. Although a reference is made to her suffering from “severe psychological conditions,” there is no discussion of her actual disability or conditions of employment.

The doctrine of judicial estoppel bars a litigant from changing positions in legal proceedings depending on the “exigencies of the moment.” In this case, the Plaintiff filed a Chapter 7 bankruptcy petition during the pendency of her claim with Prudential. In her Statement of Financial Affairs attached to that petition, she failed to include the long term disability benefit potential as an asset.

The Statement specifically asked if Plaintiff had “any interests in insurance policies” such as “disability…insurance.” She answered, “No.” Ultimately, she received a “No Asset” bankruptcy discharge.

The District Court discussed the relevant law and explained why it determined that this Plaintiff’s lawsuit had to be dismissed on the grounds of judicial estoppel due to her opposing claims in two different litigation events.

Analysis of Exceptions to Judicial Estoppel
Because of her failure to disclose the potential for collecting from her disability insurance, the District Court discussed in detail the factors it was required to consider when faced with a motion to dismiss a Plaintiff’s lawsuit on the grounds of judicial estoppel.

Were the claims truly inconsistent?
On the Statement of Financial Affairs, Plaintiff responded “No” to questions asking if she had any interest in an insurance policy for disability benefits. This was definitely inconsistent with her current assertion that she is owed long term disability benefits through her disability insurance policy.

Was a court misled by the inconsistent positions?
The District Court found that since the Plaintiff failed to “fully and accurately disclose [her] financial status” to the bankruptcy court, the obvious perception is that she “misled the bankruptcy court.”

Did the Plaintiff gain an unfair advantage by failing to fully disclose her financial status to the bankruptcy court?
The bankruptcy court granted this Plaintiff a full “no-asset” discharge of her debts, meaning she was relieved of all duty to repay any of “her many creditors.” This gave her an unfair advantage over her debtors based on her failure to disclose her potential for collecting long-term disability benefits.

Was the failure to disclose the potential for long term disability benefits due to inadvertence or mistake?
The U.S. Supreme Court carved an exception for applying the doctrine of judicial estoppel when a party’s “prior position was based on inadvertence or mistake.” The Plaintiff here provided the District Court with “no facts to support a finding of inadvertence or mistake.

Utah District Court Dismissed Plaintiff’s ERISA Lawsuit
Since this Plaintiff’s claim for disability benefits was pending with Prudential at the time she filed her bankruptcy petition, yet she failed to disclose it and actually misled the bankruptcy court, and did not meet any of the exceptions discussed by the Court, the Court held that “Plaintiff is judicially estopped from pursuing her long-term disability claims in this court.”

This case was not handled by our office, but we thought it could be useful as guidance for those with disability claims who may also have filed for bankruptcy during the pendency of their claim for disability benefits. For help with any aspects of your disability claim, contact one of our disability attorneys at Dell & Schaefer for a free consultation.