Hermann v. Hartford Casualty Insurance Co.
675 F. App'x 856
| 10th Cir. | 2017Background
- In Dec. 2009 Hermann was injured in an automobile accident, sought uninsured motorist recovery and filed a workers’ compensation claim with Hartford; Hartford initially denied the claim but accepted it in May 2010.
- In June 2010 Hermann and his wife filed Chapter 7 bankruptcy. Their Schedule B listed only a generic “Potential Personal Injury Award,” and Schedule C claimed an exemption; Hermann signed the schedules under penalty of perjury.
- At the creditors’ meeting the trustee questioned Hermann about a personal injury award and his income; Hermann mentioned receiving temporary workers’ compensation benefits but did not disclose any bad-faith or insurance-denial claim against Hartford.
- Hermann filed this suit in Oct. 2011 alleging Hartford unreasonably delayed/denied workers’ compensation benefits. Hartford moved for summary judgment asserting judicial estoppel because Hermann did not specifically disclose the Hartford claim in bankruptcy.
- Hermann reopened bankruptcy and later amended schedules to list the claim against Hartford; the trustee assigned the estate’s interest in the claim to Hermann. The district court nevertheless granted summary judgment for Hartford, ruling Hermann’s original disclosure was insufficient and judicial estoppel barred the suit.
- The Tenth Circuit affirmed, holding (1) the generic “Potential Personal Injury Award” did not put the trustee on inquiry notice of a bad‑faith/insurance‑denial claim against Hartford; (2) Hermann had knowledge and motive to conceal the claim; and (3) lesser sanctions were inadequate to protect the bankruptcy process.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hermann’s Schedule B entry "Potential Personal Injury Award" sufficiently disclosed his insurance‑denial/bad‑faith claim | The generic listing was adequate to put the trustee on inquiry notice of all claims arising from the accident, including the Hartford claim | The listing was too vague and did not reasonably alert the trustee to a separate bad‑faith/insurance‑denial claim against Hartford | Not sufficient; disclosure did not put trustee on inquiry notice |
| Whether judicial estoppel applies given bankruptcy discharge obtained after the original schedules | Hermann contends omission was inadvertent and he later amended schedules, so estoppel is inappropriate | Hartford contends Hermann knew of the claim, had motive to conceal, and obtained a discharge based on the original disclosure | Estoppel applies: Hermann had knowledge and motive; failure to disclose was not inadvertent |
| Whether the district court abused its discretion by not considering lesser sanctions before estopping the claim | Hermann argues the court should have considered lesser remedies and reopening bankruptcy cured the defect | Hartford contends lesser remedies (e.g., impeachment) would not cure the fundamental nondisclosure of the claim’s existence | No abuse of discretion; lesser sanctions insufficient to protect integrity of bankruptcy process |
| Whether post‑hoc amendment/reopening of bankruptcy cures prior nondisclosure for purposes of estoppel | Hermann argues reopening and amendment cured the omission and vindicated creditors/trustee | Hartford argues allowing amendment after omission would encourage concealment until discovered | Amendment after exposure does not excuse prior nondisclosure; estoppel still appropriate |
Key Cases Cited
- Eastman v. Union Pac. R.R. Co., 493 F.3d 1151 (10th Cir. 2007) (debtor must disclose all legal claims; failure to disclose can support judicial estoppel)
- Queen v. TA Operating, LLC, 734 F.3d 1081 (10th Cir. 2013) (sets out three non‑exclusive factors for judicial estoppel)
- Vehicle Market Research, Inc. v. Mitchell Int’l, 767 F.3d 987 (10th Cir. 2014) (cautions against overbroad use of judicial estoppel and suggests considering lesser remedies)
- Midkiff v. Stewart (In re Midkiff), 342 F.3d 1194 (10th Cir. 2003) (debtor’s duties when seeking bankruptcy discharge)
- Payne v. Wood, 775 F.2d 202 (7th Cir. 1985) (debtor must furnish enough information to put trustee on notice)
- Cusano v. Klein, 264 F.3d 936 (9th Cir. 2001) (disclosure must provide inquiry notice to trustee)
- In re Tilley, 332 B.R. 501 (D. Conn. 2005) (distinguishing generic schedule entries that do not notify trustee of distinct legal claims)