BANKRUPTCY: VICARIOUS LIABILITY DOES NOT APPLY TO § 523(a)(9)

As a bankruptcy attorney I have focused my practice on a specific type of legal practice.  I don’t know much about drafting a will, litigating a lawsuit, or defending a criminal action, but I know a lot about consumer bankruptcy.  Similarly, in my experience I have found that attorneys practicing other types of law know very little about bankruptcy.  Invariably, when I meet another type of attorney and they find out that I practice bankruptcy law they have questions for me.

Recently I ran into an attorney in my building who asked me an interesting question involving two legal concepts: vicarious liability and exceptions to bankruptcy discharge.  Vicarious liability is a form of strict liability that arises under the common law doctrine of agency.  Basically, the idea is that a superior may be responsible for the acts of a subordinate that result in liability to a third party.  For example, an employer may be liable for the torts of an employee.

The question asked me was, “can an employer discharge liability in bankruptcy that resulted from a lawsuit in which an employee was driving drunk and was involved in an accident causing personal injury to a third party?”  The Bankruptcy Code specifically states that “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 for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.  11 U.S.C. § 523(a)(9).

At first glance it appears that by combining the concept of vicarious liability with the exception to discharge, an employer should not be able to discharge this type of liability in bankruptcy.  However, most courts that have considered this issue have held that the employer is not denied discharge from liability resulting from the employee’s bad behavior.  Employers can discharge their liability even though the debt would be nondischargable if the employee were to file bankruptcy.