Malpractice and negligence are probably two of the most notorious words you never want to hear in the same sentence as your name, your profession and your business.
However frightening it may be, it does happen every day – even to some of the best professionals in their fields. Most never see it coming, and many are not prepared.
What will you do if it happens to you?
Here are three 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 enabled the husband and wife to invest in real estate limited partnerships as tax shelters between 1981 and 1985.
After some time, the couple sued the accounting firm for allegedly placing them in inappropriate tax shelters which caused them about $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 – an accusation contested by the firm’s CPA, who said that the tax shelters provided were appropriate based on the couple’s income.
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 reductions.
Case #2: Opening the Lawsuit Floodgates
Two homeowners filed suit against a school district, complaining that the expansion of a nearby high school directed water from storms toward their properties and caused flooding and erosion. They testified that they filed complaints even while the construction was still ongoing, but were told by the school district that the problem will be solved by a retention basin.
The defendant, Rose Tree Media School District, added the responsible construction company and project architect as defendants. The construction company was able to settle the plaintiffs’ $20,000 claims even before the trial, while the school district argued that it only depended on the architect’s expertise as to the design of the school expansion.
It was revealed that the third-party architect advised the school district to install an underground drainage pipe to solve the flooding problem, but the school district said that the project manager of the architect said that it was no longer needed.
The architect was found 75 percent negligent, while the jury found the school district 25 percent negligent. The first plaintiff who sought claims for damages to her home was awarded $27,366 – and both plaintiffs received $71,725 for the cost of the installation of an underground drainage pipe.
Case #3: The Beautician and a Beast of a Lawsuit
A 36-year-old female 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 hot and cold wave permanent solutions to her hair. She said that the cold wave solution was used on her without protective cotton banding, causing it to drip down her face. She allegedly complained up to four times during the procedure until one of the salon’s employees finally noticed that the customer was already suffering from a chemical burn.
The plaintiff reported to have continued to develop burn marks and blisters even after she went home. 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.
With the help of an expert testimony of a beauty stylist, the plaintiff was able to present that the beauty salon was negligent by failing to use a cotton band around her head and failing to use a neutralizing solution on the plaintiff’s face to prevent further burning.
The beauty salon also presented an expert physician who attested that the permanent wave solution used did not have any chemicals that could cause permanent hair loss. The jury, however, found that the case was presented in favor of the plaintiff.
Protecting Yourself with Personal Liability Insurance
Among the biggest mistakes businesses and professionals make is overlooking professional liability insurance – also known as errors & omissions or malpractice coverage – as their best protection against negligence and malpractice claims.
A common misconception is that
general liability coverage is an adequate defense
for individuals and companies rendering
professional advice or services.
General liability insurance may cover claims from property damage and common accidents and injuries such as slips and falls, but professional liability insurance extends the policyholder’s protection against claims for negligence, misrepresentation, inaccurate advice and violation of good faith and fair dealing.
Professional liability insurance may also cover the defense costs, but not criminal prosecution. It is required in certain areas and practices such as medicine and law, yet it is still often disregarded by other professionals – for reasons ranging from a misguided attempt at lowering their insurance costs to the delusion that they will never face any malpractice or negligence case.
Overlooking the necessity of
professional liability insurance means
having to shoulder all costs and responsibilities
such as hiring an attorney, and paying out
settlements and court judgments.
Without professional liability insurance,
these fees may easily amount to hundreds of thousands –
if not millions – of dollars.
With professional liability insurance, you will be backed by your insurance company, which may not only have the best attorneys, but the expertise and experience to know which attorneys are best suited for a particular case. More importantly, insurance companies have the capability to settle claims at a lower cost, manage legal fees and create savings that are otherwise spent by those who do not have professional liability insurance.
The best defense you can have for unforeseen and possibly irreversible damages such as the above real-life cases is a solid insurance policy with the added protection of professional liability coverage.
Contact G.R. Reid Insurance to discuss what options best apply to you and your profession.