Trying to Get Blood From a Turnip

Medicine’s professional liability system often operates on an implicit premise: that a finding of negligence will translate into meaningful, collectable compensation for the injured patient. Experitas advisor Jeffrey Segal, MD, JD, recently published a post that challenges that premise in a discrete subset of cases that may be more common than many practitioners assume.

When a defendant clinician files for bankruptcy protection, the malpractice action is typically subject to the federal automatic stay, which generally halts continuation of litigation against the debtor absent court-authorized relief. For plaintiff counsel operating on a contingency model and managing active dockets, the stay can materially alter timing, leverage, and the economic calculus of the case, including client expectations regarding recoverability.

Dr. Segal summarizes the governing framework here.

He cites the Supreme Court’s 1998 decision in Kawaauhau v. Geiger, which held that negligence-based malpractice liability does not fall within the Bankruptcy Code’s “willful and malicious injury” exception to discharge under 11 U.S.C. § 523(a)(6)—i.e., the exception requires intentional injury, not merely an intentional act that results in injury.

As a practical matter, this means that a malpractice judgment predicated on ordinary negligence (and, in many cases, recklessness) is generally dischargeable as to the debtor-physician’s personal liability (subject to fact-specific exceptions).

Importantly, dischargeability of the physician’s personal exposure is not the same question as recoverability from other sources/c-defendants: plaintiffs may seek relief from the stay to proceed for limited purposes (including establishing liability to access available insurance proceeds), and cases may continue against non-debtor co-defendants.

State-level variables remain outcome-determinative on collectability, including (among other factors) the existence and limits of professional liability insurance, the relationship of coverage to the verdict amount, the number and solvency of co-defendants, and state exemption rules that affect what assets (if any) remain available for execution.

What is consistent at the federal level is the baseline principle articulated in Geiger: negligence-based malpractice liability is generally dischargeable under § 523(a)(6).

For plaintiff counsel, the operational implication is straightforward: case selection discipline must account not only for clinical merit and liability, but for early, candid assessment of collectability and the practical pathways—if any—to recovery. This case exemplifies the potential hazard of focusing exclusively on merit assessment. Experitas specializes in fast, comprehensive merit analysis, so you can keep a high-level view of all the other complexities of your cases.

Thanks to Dr. Segal for sharing these insights at www.medicaljustice.com!