Opinion ID: 2162424
Heading Depth: 1
Heading Rank: 4

Heading: Exempt Status of the Disability Policy

Text: [¶ 12] Herbert argues that the payments he receives under his disability insurance policy are exempt pursuant to 14 M.R.S.A. § 4422 (Supp.1997). The statute distinguishes between disability benefits, which are entirely exempt, section 4422(13)(C), and disability pensions and annuities, which are exempt only to the extent that they are reasonably necessary to support the debtor, section 4422(13)(E). [3] State authority interpreting these statutory provisions is nonexistent and resort to authorities interpreting their federal counterparts is necessary. See In re Bates, 176 B.R. 104, 106 (Bankr.D.Me. 1994). Whether Herbert's disability policy falls within subsection (13)(C) or (13)(E) is a question of law. See id. at 107. [¶ 13] The federal counterpart to section 4422(13)(C), 11 U.S.C. § 522(d)(10)(C) (1997), was intended to encompass [t]emporary contractual benefits, most of which will arise from the debtor's employment. 2 NORTON, Norton Bankruptcy Law and Practice § 46:17, at 46-34 (2d ed.1994). For example, workers compensation benefits, which compensate an injured worker for loss of current wages, have been held to fall under subdivision 10(C). See, e.g., In re Williams, 181 B.R. 298 (Bankr.W.D.Mich.1995); In re LaBelle, 18 B.R. 169 (Bankr.D.Me.1982). The federal counterpart to section 4422(13)(E), 11 U.S.C. § 522(d)(10)(E) (1997), was intended to encompass more permanent forms of payments akin to future earnings, including pensions and annuities paid for by the policy holder. 2 Norton at 46-35; see also In re Pettit, 61 B.R. 341 (Bankr.W.D.Wash.1986). For example, individual retirement accounts paid for by the debtor have been held to fall under subdivision (10)(E). See e.g., In re Bates, 176 B.R. at 106; In re Hickenbottom, 143 B.R. 931 (Bankr.W.D.Wash.1992); In re Yee, 147 B.R. 624 (Bankr.D.Mass.1992). [¶ 14] The only evidence describing Herbert's disability policy is the affidavit provided by Provident, which states that Herbert is eligible to receive payments under the policy for life or until he is no longer eligible to receive the benefit. Aside from his bald assertion that his policy is fully exempt, Herbert did not provide any evidence to support this contention. Most notably, Herbert did not provide the court with a copy of the policy. [¶ 15] The evidence concerning the policy indicates that it provides Herbert with an indefinite stream of payments, akin to future earnings, on account of his disability. Therefore, as a matter of law, these payments fall under 14 M.R.S.A. § 4422(13)(E) and are exempt only to the extent reasonably necessary for Herbert's support. [¶ 16] Herbert also argues that, if the court was correct in ruling that his disability benefits are exempt only to the extent reasonably necessary for his support, he was denied the opportunity to present evidence of his need. The court's order denying Herbert's motion to dissolve trustee process leaves open to Herbert the option to present such evidence and we remand for that limited purpose.