Bailey v. Reed (In re Reed), 587 B.R. 202

Bailey worked for Reed’s subcontracting business (K & R → Connect ME) and was told the company had workers’ compensation insurance.
Connect ME’s MEMIC policy was suspended late 2007; Reed notified Bailey and ICON and stopped work while seeking reinstatement.
ICON’s principal (DelVecchio) asked Reed to return “under” ICON; Reed believed ICON’s policy would cover him and Bailey until Connect ME’s policy resumed; they returned to work mid‑January 2008.
On February 4, 2008 Bailey fell from a ladder, suffered serious injuries, and later pursued a workers’ compensation claim; the Maine Board found Bailey employed by Connect ME and ordered benefits against Connect ME.
Reed filed Chapter 7 in July 2016; Bailey sued to except the workers’ compensation debt from discharge under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6).
After trial the bankruptcy court found Bailey failed to prove Reed acted with fraud or with intent to cause injury and entered judgment for Reed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the debt is nondischargeable under §523(a)(2)(A) (fraud, false pretenses)	Reed knowingly or recklessly misrepresented that ICON’s coverage would apply, inducing Bailey to return to work uninsured	Reed lacked actual or constructive knowledge that ICON would not cover them; he told Bailey about the suspension and believed in good faith ICON was providing coverage	Denied — Bailey failed to prove Reed’s knowledge/intent to deceive; court found Reed’s belief was in good faith
Whether the debt is nondischargeable under §523(a)(6) (willful and malicious injury)	Reed’s operation without coverage resulted in injury to Bailey and should be nondischargeable	§523(a)(6) requires intent to cause injury; Reed did not act with substantial certainty that injury would occur and lacked intent to harm	Denied — injury resulted from lack of insurance/misunderstanding, not an intentional act to cause injury; §523(a)(6) not satisfied
Whether Reed’s Rule 52(c) oral motion should be granted	(Bailey argued on merits)	Reed sought judgment on partial findings after plaintiff rested	Motion denied as moot — court ruled for Reed after full trial; Rule 52(c) motion denied but outcome favors Reed

Grogan v. Garner, 498 U.S. 279 (creditor bears preponderance burden to except debt from discharge)
Palmacci v. Umpierrez, 121 F.3d 781 (1st Cir.) (elements for §523(a)(2)(A) scienter and intent)
Spigel v. ? (In re Spigel), 260 F.3d 27 (1st Cir.) (fraud standard and fresh‑start policy for bankruptcy)
Cohen v. de la Cruz, 523 U.S. 213 (statutory scope of §523(a)(2)(A) — "to the extent obtained by")
Kawaauhau v. Geiger, 523 U.S. 57 (willful means intent to cause injury; reckless or negligent acts not within §523(a)(6))
Roumeliotis v. Popa (In re Popa), 140 F.3d 317 (1st Cir.) (employer’s uninsured status intentional but not intended to cause injury; §523(a)(6) not met)