social security disability lump sum distribution

My wife received a lump sum distribution in 2010. A good part of that was reimbursed to her long term disability insurance company. Some was used to pay attorney fees. My income alone, without the social security payments, puts us over the taxable threshold. The long term disability insurance was paid for with after tax dollars, so no taxes were owed on the actual disbursement. Are taxes due on the portion of her social security disability payments used to reimburse the long term disability insurance company?