Professional Liability Matters

LATEST INSIGHTS

October 3, 2013 • Accountants, Professional Liability Matters

Hefty Audit Malpractice Case Dismissed due to Lack of Reliance

It is inevitable that blame will be cast on the auditor: when an investment tanks, when embezzlement is discovered, when stocks take a plunge. It is the independent auditor that concluded that the financial statements were presented fairly and therefore the auditor should have uncovered the ______________. Many plaintiffs follow this script. As a result, the defending auditor is left to argue that he is not responsible for the intentional acts of others or unforeseen changes in the underlying client’s business. This defense requires a fact intensive debate and the involvement of CPA experts; i.e. it’s expensive. A recent decision out of California, however, provides a strong argument for auditors that the plaintiff must establish actual reliance on the audit report in order to prove a claim.

October 2, 2013 • Legal Malpractice, Professional Liability Matters

Certificate of Merit Blunder Results in Dismissal

A growing number of states have enacted some version of an “affidavit of merit” statute in professional malpractice matters. The intended purpose behind these laws is to reduce “unnecessary” or unsupported lawsuits. In states such as Pennsylvania, New Jersey, and others, plaintiffs in malpractice litigation must certify through an impartial professional in the defendant’s field that there is a fundamental basis for the complaint. While the specifics of the particular statute in each state may differ in terms of scope and application, the importance of compliance cannot be overstated. A pro se litigant in New Jersey recently learned this lesson the hard way.

October 1, 2013 • Medical Malpractice, Professional Liability Matters

A Significant Blow to Med-Mal Reform

Medical malpractice reform has been on virtually ever state’s legislative agenda for the past several years as a result of a concerted effort by the defense bar and public interest groups to insulate physicians from frivolous suits. In an effort to curb rising healthcare costs, a variety of legislation imposing prerequisites on medical malpractice suits has been passed by a number of states. Rather than simply imposing damages “caps,” some states are getting creative with their reform legislation. However, a recent decision by a Florida federal judge dealt a major blow to those efforts.

September 27, 2013 • Ethics, Professional Liability Matters

Arbitrator’s Conflict Voids Arbitration Award

We previously warned of the risk that settlements purportedly achieved at mediation may unhinge due to the failure to document the settlement terms. Along those lines, a recent decision highlights the effect of an arbitrator’s failure to disclose his connection to a party. Many attorneys are chosen as an arbitrator due to their reputation in the community or personal/business relationships. Accordingly, there may be some heightened risks of potential conflicts, as seen here.

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.