## Facts

- Christine Genson died while under the medical care of Dr. Lewis A. D. Edgeworth.
- Approximately one month after Genson’s death, Edgeworth filed a Chapter 7 bankruptcy petition.
- The decedent’s family members did not participate in the bankruptcy case (e.g., no proof of claim).
- After Edgeworth received a discharge, the family obtained bankruptcy court permission to file a state-court medical malpractice action to establish liability and seek recovery only from Edgeworth’s malpractice insurer.
- Edgeworth later obtained an order enforcing the discharge injunction under 11 U.S.C. § 524(a) and enjoining the state-court action.
- There was no showing that the insurer denied coverage, that Edgeworth would bear defense costs, or that the insurer defended under a reservation of rights.

## Issues

1. Whether a Chapter 7 discharge and § 524(a) injunction bar a post-discharge malpractice action against the debtor when plaintiffs seek recovery solely from the debtor’s liability insurer.
2. Whether malpractice insurance proceeds are property of the bankruptcy estate under 11 U.S.C. § 541 such that allowing the suit would interfere with estate administration.

## Decision

- The Fifth Circuit reversed the injunction and allowed the state-court malpractice action to proceed.
- The court held that plaintiffs may sue the debtor nominally to establish liability as a prerequisite to recovery from the malpractice insurer.
- The court concluded that § 524(e) prevents extending discharge protection to the insurer and that the policy proceeds at issue were not property of the estate.

## Legal Principles

- A bankruptcy discharge relieves the debtor from personal liability for a debt but does not extinguish the debt itself.
- Section 524(a) enjoins actions to collect a discharged debt as a personal liability of the debtor.
- Section 524(e) provides that discharge does not affect the liability of other entities (including liability insurers) for the same debt.
- In liability-insurance cases, a creditor may pursue a post-discharge “liability-fixing” action against the debtor when recovery is limited to available insurance and no collection is sought from the debtor personally.
- Under § 541, an insurance policy may be estate property, but policy proceeds are not necessarily estate property; where proceeds are payable to third-party tort claimants rather than to the debtor, the estate may lack an interest in the proceeds.

## Conclusion

The Fifth Circuit held that a Chapter 7 discharge does not bar tort claimants from prosecuting a post-discharge malpractice suit against the debtor physician when the action is maintained solely to establish liability and collect, if at all, from non-estate malpractice insurance proceeds, consistent with § 524(e)’s preservation of third-party liability.


Matter of Edgeworth, 993 F.2d 51 (5th Cir. 1993)