Friday, September 14, 2012

Medical Malpractice Debts

            Sorry about not posting in a while – the start of the fall semester and the submission of job applications has taken considerable time.

            I would like to discuss a topic that is, admittedly, not as common an issue for most debtors as those I have previously discussed, but still interesting in my view.  Broadly speaking, this is the ability to discharge a debt under section 523(a)(6), which is for “willful and malicious injury by the debtor to another entity or to the property of another entity.”  Narrowly speaking, I will be discussing this in the context of medical malpractice debts. 

            Speaking very generally, a debtor can discharge the equivalent of a negligent tort, but not something that would amount to an intentional tort.  A tort is, broadly speaking, a wrongdoing for which the law provides a remedy in a civil case.  To illustrate in a simple example, if I am driving my car, drop my cell phone on the floor, and I accidentally run over a person who later sues me, I can probably discharge this debt in bankruptcy.  I use this example rather than drunk driving, as that presents somewhat different rules under 523(a)(9) – I’ll write more on that in a later post.  If I am driving my car, see a person whom I dislike, put the pedal to the metal and purposely hit that person who later sues me, bankruptcy will not relieve me of this duty (as it shouldn’t).

            A special situation, then, arises for physicians and other medical professionals.  The leading case on this subject was issued by the Supreme Court in Kawaauhau v. Geiger, 523 U.S. 57 (1998).  In a unanimous opinion issued by Justice Ginsburg, the Court held that a debt arising from a medical malpractice judgment for negligent or reckless conduct was dischargeable in bankruptcy.  Despite its unanimity among the Court members, I recall feeling great skepticism the first time I read the case, and still find its reasoning somewhat questionable.  I have chosen to write about this case, in part, because when I was a staffer on an academic journal last year, I realized that I wanted to write about this subject at a point when it was too late to make such a decision.  But I digress. 

            In Geiger, the patient had a foot injury.  She sought treatment from Dr. Geiger, who prescribed her oral penicillin in order to reduce the risk of infection, despite his knowledge that intravenous penicillin would have been more effective.  Dr. Geiger then left for a trip, and upon his return, overruled the decision of other physicians to transfer the patient to an infectious disease specialist, as he believed the infection was less severe.  Dr. Geiger was wrong, and the patient eventually had to have her right leg amputated below the knee. 

            The patient then sued Dr. Geiger, and obtained a judgment for about $355,000.  Dr. Geiger, having had his wages garnished as a result of his lack of malpractice insurance, then filed for bankruptcy.  The Bankruptcy Court for the Eastern District of Missouri did not allow this debt to be discharged, holding that it Dr. Geiger’s actions were below prevailing medical standards, and so amounted to “willful and malicious” injury in 523(a)(6).  The District Court agreed. The U.S. Court of Appeals for the Eighth Circuit reversed, holding that the exemption from discharge is confined to actions amounting to an intentional tort, and allowed the discharge.

            The Supreme Court agreed to hear the case, and affirmed the Eighth Circuit’s decision to allow the discharge.  The Court interpreted 523(a)(6) to mean that the exception from discharge is limited to acts done with the intent to cause injury.  Applying the statute to mean that all acts done intentionally which cause injury was too broad of a standard for the Court.  It went on to say that intentional torts “generally require that the actor intend ‘the consequences of an act,’ not simply ‘the act itself.’”

            I don’t take issue with the reasoning in general.  The result in the case of medical malpractice debts in particular seems inequitable to me, though.  Why not hold professionals, such as physicians, to a higher standard?  Dr. Geiger, without malpractice insurance (which he probably should have had), decided to practice medicine in a manner that he knew was less effective.  The patient alleged that this was simply a cost-cutting measure.  The result for the patient was that she had a good portion of her leg amputated, and yet did not receive any compensation from her physician who was, by all accounts, negligent.  To me, a physician such as Dr. Geiger should have known better than to practice medicine in this manner, whether it was for cost-cutting or not.  Generally in tort law, physicians and other professionals are held to a higher standard of care than the average person.  To me, it only makes sense for this special standard of care to translate to a special exception for discharge in bankruptcy as well.  Otherwise, the higher standard of care may be reduced to a lack of meaning should the physician file for bankruptcy.

            The Court’s decision was well-reasoned.  The Bankruptcy Code, then as today, does not provide an exception of discharge for medical malpractice debts.  Near the end of the Court’s opinion, Justice Ginsburg writes that although the Court declines to make a policy exception for discharge for medical malpractice debts, “Congress, of course, may so decide.  But unless and until Congress makes such a decision, we must follow the current direction § 523(a)(6).”  It’s in Congress’s hands to fix what I perceive as an inequitable loophole.  I’m not getting my hopes up.

            I expect to write again next week on a topic which applies to (nearly) all individual debtors: state exemptions from the bankruptcy estate.  I’ll focus on my state of Virginia, as it has some interesting provisions.  Thanks for reading.