Professional liability suits are about collecting money. At least that is a main goal.
Money from the doctor’s insurance carrier. Or if the verdict is over policy limits, or if you are not covered, then money from the doctor’s personal assets.
If the doctor “has no money” then this process might be an exercise in futility.
Bankruptcy is the process of discharging debts. Doctors are afforded access to filing bankruptcy just as anyone else is.
A court judgment against a doctor would become a debt. The question is what happens during and after a med mal case if the doctor DOES file for bankruptcy.
If it happens in the middle of a case, that case is stayed. The focus moves to federal court, where the bankruptcy case plays out. As long as this doctor is considered a defendant in the med mal case, the med mal case comes to a grinding halt.
If there are multiple defendants, and the plaintiff’s attorney dismisses the soon-to-be-bankrupt doctor, the rest of the med mal case can proceed.
Or if the plaintiff’s attorney agrees to limit their recovery to insurance money only (meaning, foregoing action against the doctor’s personal assets), they can file a motion to lift the stay.
For the doctor who files bankruptcy after a jury has rendered its verdict, will that debt be discharged?
Possibly. Even likely.
In bankruptcy, some debts will not be discharged.
Under 11 U.S.C. 523(a)(6) Willful and Malicious Injury:
A debt for the willful and malicious injury to the property of another entity is not dischargeable. The statute provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328
(b) of this title does not discharge an individual debtor from any debt—
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity[.]
Under the willful and malicious exception, the injury must be both willful and malicious: both terms modify injury. “Willful” means deliberate or intentional. Kawaauhau v. Geiger, 523 U.S. 57, 61 n.3, 118 S. Ct. 974, 977 (1998). To be nondischargeable, the debtor must intend to injure another entity or his property.2 Id. at 61. Willful does not encompass a recklessly or negligently inflicted injury. Id. at 64. “Malicious” means “‘wrongful and without just cause or excessive even in the absence of personal hatred, spite or ill-will.’” Hope v. Walker (In re Walker), 48 F.3d 1161, 1164 (11th Cir. 1995) (quoting Lee v. Ikner (In re Ikner), 883 F.2d 986, 991 (11th Cir. 1989)). In re: RACHEL TURNER SMITH
Mere negligence (such as what most medical malpractice suits allege) is unlikely to make a claim non-dischargeable.
No less important, a willful act is unlikely to be covered by one’s professional liability carrier. Even the decision to intentionally not carry professional liability insurance would not cleverly keep the plaintiff’s attorney in the game.
The decision to not carry medical malpractice insurance was front and center in the US Supreme Court Case, Kawaauhau v. Geiger, 523 U.S. 57 (1998).
There, Margaret Kawaauhau suffered a foot injury and sought treatment from Dr. Paul Geiger.
Geiger’s treatment led to a severe infection, and Kawaauhau ultimately lost her right leg below the knee.
A malpractice suit resulted in a jury award of approximately $355,000 against Dr. Geiger.
Geiger, who was uninsured, filed for bankruptcy. Geiger was not required under Georgia law to be covered by professional liability insurance.
The Kawaauhaus asked the bankruptcy court to declare the debt nondischargeable, arguing it was a “willful and malicious injury”.
The Bankruptcy Court concluded that Geiger’s treatment fell far below the appropriate standard of care and therefore ranked as “willful and malicious.” Accordingly, the Bankruptcy Court held the debt nondischargeable. In re Geiger, 172 B. R. 916, 922-923 (Bkrtcy. Ct. ED Mo. 1994). In an unpublished order, the District Court affirmed. App. to Pet. for Cert. A-18 to A-22.
At this point, it was a win for the plaintiff.
Then the doctor’s luck turned.
A three-judge panel of the Court of Appeals for the Eighth Circuit reversed, 93 F.3d 443 (1996), and a divided en banc court adhered to the panel’s position, 113 F.3d 848 (1997) (en banc). Section 523(a)(6)’s exemption from discharge, the en banc court held, is confined to debts “based on what the law has for generations called an intentional tort.” Id., at 852. On this view, a debt for malpractice, because it is based on conduct that is negligent or reckless, rather than intentional, remains dischargeable.
The Eighth Circuit acknowledged that its interpretation of § 523(a)(6) diverged from previous holdings of the Sixth and Tenth Circuits. See id., at 853 (citing Perkins v. Scharffe, 817 F.2d 392, 394 (CA6), cert. denied, 484 U. S. 853 (1987), and In re Franklin, 726 F.2d 606, 610 (CAlO 1984)).
Meaning, there was a split between the Eighth Circuit and other circuits. This made the case a shoe-in for resolution by the Supreme Court.
The Supreme Court held that the term “willful and malicious” applies to an act done with the intent to cause injury.
Negligent or reckless acts, such as those in a malpractice case, did not meet this standard.
Therefore, the malpractice judgment debt was dischargeable in bankruptcy.
The Court found that the phrase “willful and malicious injury” requires proof of an intentional injury, distinguishing it from intentional acts that result in an unintended injury.
And that was that.
The physician’s debt in bankruptcy was discharged.
In any event, things get more complicated once any party in a legal case files for bankruptcy.
What do you think?
