Discharge of Malpractice Judgment in Bankruptcy

All debt is generally discharged in a chapter 7 bankruptcy case with certain important exceptions. A recent case decided in January, 2014 by the Bankruptcy Court in Miami involved the dischargeability of a dental malpractice claim.

In this case, a former dental patient obtained a judgment for dental malpractice in the Dade-County Circuit Court in 2011. In 2012, the dentist filed for chapter 7 bankruptcy relief.  The former patient sought to except the dental malpractice claim from the chapter 7 discharge on the alleging that the dentist obtained his fee under "false pretenses, a false representation, or actual fraud..." 11 U.S.C. § 523(a)(2)(A).  The Court noted that the action for exception from discharge was not brought under 11 U.S.C. § 523(a)(6) on an allegation of "will and malicious injury by the debtor to another entity or to the property of another entity."  The former dental patient alleged that there was a "false representation" or "fraud" claiming that the dentist did not disclose his drug dependency and lapse in malpractice insurance.
 False RepresentationThe bankruptcy court judge explained that to establish a "false representation" under 11 U.S.C. § 523(a)(2)(A) requires proof of a false or misleading statement with the intent to deceive, inducing a person to turn over money or property.  The court stated that the establishment of a  "false representation" requires an "expressed misrepresentation - oral or written"  and that "[s]ilence, or lack of communication, cannot deliver proof by a preponderance of the evidence."  Hanft v. Church, (In re Hanft, N.D., P.A.), 315 B.R. 617 (S.D. Fla. 2002).  In this case, the court did not find that the dentist had made any misrepresentations that were intended to deceive the former patient and cause her to turn over money or property.  The court noted that the dentist performed the services while licensed and insured.
Actual FraudThe court also found that there was a lack of "actual fraud." The court reviewed that the establishment of "actual fraud" under this section "refers to common law fraud, and requires" the proof by a preponderance of the evidence that 1. there was a false representation made with the purpose and intent of deception, 2. that the representation was relied upon, 3. that the reliance was justifiably founded, and 4. that the person was damaged as a result of the false statement. Field v. Mans, 516 U.S. 59, (1995).   The court noted that "actual fraud" may be proven by a misrepresentation that is express or implied, but proof of actual fraud is required and not fraud merely implied in law.  The court found that the former patient did not prove express or implied "actual fraud" was committed.

The Court also rejected the former patient's argument that the dentists silence or omissions regarding his drug use or lapse in insurance coverage constituted "fraud" giving rise to an exception to discharge. The Court held that there was no proof that the dentist was under "any duty to disclose facts regarding either his drug use or his business' fiscal operations..."   The court stated that no "statute or legal case was presented to prove  that illnesses, weaknesses or impairments must be disclosed by medical professionals to their patients."

The Court also held that the dentist's failure to disclose the lapse of the malpractice insurance did not of itself constitute "fraud."  The Court distinguished case law presented with regard to the lapse of malpractice insurance involving physicians as opposed to dentists as the Florida regulations as to each profession differ. The Court noted that dentists are cover by the provisions of Chapter 466 of Florida Statutes while physicians are governed by the provisions of Chapter 458.  The Court pointed out that while physicians are required to disclose the failure to carry insurance, dentists are not.

Finally, the Court rejected that former patient's argument that malpractice judgments should be excepted from bankruptcy discharge when there was reckless action or their was a lack of malpractice insurance as the U.S. Supreme Court has already rejected that argument in the case of Kawaauhau v. Geiger, 523 U.S. 57 (1998).

The Court though did express sympathy for the unfortunate victim of the dentist's malpractice and suggest that it may be appropriate for the Florida legislature to require dentists to disclose the lack of malpractice insurance as is required of physicians or for the Board of Dentistry to establish a fund "like that established by the Florida Bar for victims of a lawyer's misappropriation or embezzlement."

Jordan E. Bublick is a Miami Bankruptcy Lawyer - www.bublicklaw.com