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Are You Susceptible to Legal Action Against Your Professionalism?

March 2017

Are You Susceptible to Legal Action Against Your Professionalism? Here are Two Real-Life Cases

Malpractice and negligence can be two of the most frightening words when paired with your name, your profession, or your business. However feared these accusations may be; claims are brought against professionals every day - even to some of the best in their fields. Most never see it coming, and many are not prepared.

Are you covered by your insurance policy if such claims are brought against you? Here are two real-life cases that you may be able to relate to.

Case #1: Tax Shelter Skelter

A couple seeking a tax shelter hired an accounting firm that provided income tax and investment services. The firm invested money on their behalf in real estate limited partnerships, which the couple later claimed to be inappropriate for their income levels as they incurred $370,000 in investment losses. The firm, meanwhile, reportedly earned $800,000 in commissions.

The couple hired a CPA who testified that the accounting firm placed the plaintiffs below the acceptable standard of care, a claim denied by the firm’s CPA. While the case has not been closed due to unresolved issues, the jury found both parties negligent, with the accounting firm bearing 60 percent of the negligence. The couple received $93,060 with applied reductions.


Case #2: The Beautician and a Beast of a Lawsuit

A young woman went into a beauty salon for a perm and went home with multiple chemical burn injuries and a bald patch.

The customer accused the beauty salon of being negligent in its application of the permanent solution to her hair. She cited the cold wave solution was used without the placement of protective cotton banding around her head, allowing the solution to drip down her face. This alleged negligence led to chemical burns despite her claims of complaining as many as four times during the procedure.

The plaintiff reported to have continued to develop burn marks and blisters long after leaving the salon. She later filed suit against the beauty salon for damages including pain and suffering resulting from the burn injuries, and temporary and permanent hair loss.

While both the plaintiff and defendant presented compelling expert testimonies, the jury found that the case was presented in favor of the plaintiff.

Protecting Yourself with Professional Liability Insurance

It is required in certain areas and practices such as medicine and law, yet it is often disregarded by other professionals - for reasons ranging from a misguided attempt at reducing their insurance costs to the misconception that their profession is exempt to such threats. Just as in these cases involving a beautician and CPA, many professions ranging from architects to personal trainers are commonly subject to malpractice and negligence claims.

Underestimating the pertinence of professional liability coverage places policyholders at high risk of having to assume all costs and responsibilities of defending their business and themselves. These costs include court and settlement costs paired with attorney fees and can easily total into the hundreds of thousands- of dollars.

With professional liability insurance, you will be backed by your insurance company, who often times has access to the best attorneys, expertly equipped to handle your case. More importantly, insurance companies have the ability to settle claims at a lower cost, manage legal fees and reduce general expenses otherwise incurred by those who do not have professional liability insurance coverage.

Cases such as the ones previously discussed not only involved high financial costs, but often times such accusations result in irreversible damage to your professional and personal reputation. The best defense against such unforeseen threats is a thorough evaluation of all risks plaguing you and your business, paired with a well-designed policy to protect you against identified hazards.  Talk with your agent and discuss what options best apply to you and your profession.

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