Professional Liability Matters

LATEST INSIGHTS

September 26, 2013 • Accountants, Professional Liability Matters

A First of its Kind: FDIC v. Independent Auditor

A recent decision in a closely watched accounting malpractice matter – the first of its kind initiated by the FDIC – may suggest cause for concern for accountants. As receiver for a failed bank, the FDIC may sue professionals who played a role in the failure of the institution. In the wake of recent bank failures, the FDIC has targeted officers and directors, attorneys, and brokers. Until recently, however, the FDIC had not pursued an audit firm. That all changed on November 1, 2012 when the FDIC, as receiver for the failed Colonial Bank, initiated a $1 billion malpractice claim against the bank’s auditors PricewaterhouseCoopers and Crowe Horwath. This lawsuit, and a recent decision denying the defendants’ motion to dismiss, raise critical questions.

September 24, 2013 • Ethics, Professional Liability Matters, Risk Management

Boston’s Big Dig Spawns Big Malpractice

Boston’s “Big Dig” continues to spark lawsuits 15 years after construction was completed. The most expensive US highway project – in excess of $24 billion – the Big Dig rerouted a major highway in Boston into a 3.5 mile tunnel. The project was plagued by delay, leaks, design flaws, and substandard materials. Ten years after completion of the project, in 2006, 26 tons of ceiling tiles and concrete became dislodged, fell and killed one motorist, injuring others. Reportedly, the National Transportation Safety Board blamed the collapse on faulty epoxy. In the most recent lawsuit arising from this incident, an insurance carrier sued its attorneys for malpractice for allegedly failing to disclose a conflict of interest.

September 18, 2013 • Coverage, Miscellaneous Professionals, Professional Liability Matters

Lack of Leg Waxing License Puts Coverage at Risk

The majority of professional liability lawsuits target attorneys, accountants, and physicians. But, there are a series of so-called “miscellaneous professionals” who also face malpractice exposure: marketing consultants, recruiters, travel agents…and even leg waxing professionals. Many professionals are licensed by the state to practice in their chosen field and the failure to obtain such a license may void any professional malpractice coverage.

September 17, 2013 • Employment Practices Liability, Professional Liability Matters

Good At-Will Hunting: At-Will Employment Put to the Test

While most countries allow employers to dismiss employees only for cause, employment relationships are presumed to be “at-will” in all U.S. states except Montana. As a result, most employers are well aware that employment relationships in the States may be terminated at any time, for any legal reason. But, the at-will presumption is a default rule that can me modified by contract whereby the employee may hold a reasonable expectation of continued employment. The modification of employment terms by way of contract was recently put to the test in New York. Victory for the employer.

September 12, 2013 • Legal Malpractice, Professional Liability Matters, Risk Management

Law Firm Denied Coverage Due to “Fraud Exclusion”

Most professionals are governed by this universal rule: always act in the best interests of the client. But, there is an unspoken footnote to that rule: unless the client engages in unethical, illegal or otherwise improper conduct. Make no mistake, when a professional cooperates in the client’s foul play, she is also exposed to liability and perhaps a denial of coverage due to a fraud exclusion existing in many professional malpractice policies. This limitation became a reality for a Colorado law firm accused of assisting its clients in the commission of fraud.

September 10, 2013 • Agents and Brokers, Professional Liability Matters

Cleveland Indians Sue Insurance Broker following Wrongful Death Claim

It is generally understood that an insurance broker may be held liable for failing to obtain requisite insurance for the insured. But, there is plenty of room for debate when the broker fails to obtain coverage for a third-party; i.e. an additional insured. This issue was put to the test by the Cleveland Indians following the death of one of its patrons attending pre-game activities. According to the Sixth Circuit, the team stated a valid claim.

September 9, 2013 • Ethics, Legal Malpractice, Professional Liability Matters

Dealing with the Problem Client

We’ve all been there. Inevitably, every professional encounters a client whose demeanor or attitude make the representation difficult. As a result, the professional may be tempted to ignore the situation and limit contact with these clients. But, that would be a mistake. Pursuant to a recent ethics ruling in Matter of Azar, DRB 13-041, the New Jersey Disciplinary Review Board determined that providing the cold shoulder to problem clients warranted disciplinary action.

September 6, 2013 • Professional Liability Matters, Risk Management

Pleading the Fifth in the Civil Context

Dropping the nickel, a/k/a pleading the Fifth Amendment is most often referenced on TV dramas in a criminal setting. Most civil practitioners do not encounter the Fifth and therefore may be unfamiliar with its role in civil litigation. However, since the line between civil and criminal liability is not entirely clear in some scenarios impacting professionals, there may be situations when the Fifth is appropriate, albeit risky.