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Product Liability, Bankruptcy and the Proceeds of Legal Action

By Janice G. Inman
July 02, 2017

When does a cause of action accrue for an injury caused by an implanted medical device?

This is a question that usually comes up when determining whether an allegedly injured plaintiff has brought his or her lawsuit in a timely enough manner to keep the claim from being thrown out on statute of limitations grounds. But if the case has been settled, or tried to a verdict that is not appealed, aren't we done with this question?

Maybe not. The date of injury and accrual of a product liability cause of action might also impact on bankruptcy creditors, as evidenced by the recent dispute decided on appeal by U.S. District Court Judge Joseph F. Bianco in Mendelsohn v. Ross, 2017 U.S. Dist. LEXIS 70982 (E.D.N.Y 5/9/17). The case dealt with an unusual question presented to a bankruptcy court by a debtor's medical device product liability claim: If, at the time of bankruptcy filing, the debtor has a potential civil claim that lacks some of the elements necessary for recovery (which elements may never develop), yet later receives settlement, are the proceeds of that settlement part of the bankruptcy estate?

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