Case Summary:
The debtor filed an adversary proceeding against State Farm for a violation of the discharge injunction. At the time of the debtor’s bankruptcy, State Farm’s subrogation unit had two lawsuits pending against the debtor; both lawsuits stemmed from the same automobile accident. State Farm was represented by different law firms in each action. One law firm was clearly notified of the bankruptcy, and forwarded that notice to State Farm’s collection/subrogation unit. An agent in the subrogation unit thereafter directed the dismissal of that lawsuit; the other lawsuit, however, was not dismissed. The lawyer for State Farm thereafter obtained a judgment against the debtor and had the debtor’s driver’s license suspended.

The court concluded that State Farm had actual knowledge of the debtor’s bankruptcy, and that the second claim had been discharged in the debtor’s bankruptcy. The court also found that the insurer was responsible for a willful violation of the discharge injunction when it failed to supervise the attorney acting as its agent or to notify him of the pending bankruptcy. The debtor was awarded $66,629.66 for lost wages, emotional distress, and the discomfort and costs associated with the loss of his driver’s license for almost six months.

Statute/Rule References:
11 U.S.C § 524 -- Discharge Injunction