The debtor was covered by a group long term disability (LTD) insurance policy through his employer.  The debtor became disabled, and qualified for a LTD monthly benefit which was to be reduced by any Social Security disability or retirement benefit he received.  The debtor elected to receive a full, unreduced LTD monthly benefit while he awaited a determination on his claim for Social Security benefits.  Three years later, he was awarded Social Security disability benefits and received a lump sum payment.  The LTD insurer then requested reimbursement of $92,772 that it had overpaid the debtor.  The debtor sent the insurer a check and filed Chapter 7 relief two months later.  The trustee sought to recover the $92,772 as a preferential transfer.  11 U.S.C. § 547(b). 

The court held that the “ordinary course of business” defense, section 547(c)(2), protected the transfer.  Both the debt the debtor incurred in favor of the insurer and the $92,772 payment of that debt were made under circumstances similar to those which exist between a similarly situated disabled employee and his insurance company and were consistent with industry standards.  Further, the debt and repayment were incurred and made pursuant to the terms of a contract.  The court also held that there was no unusual collection practice because the insurer was merely stating the obvious when it told the debtor it would sue if he failed to pay.