3 Professional Liability Lawsuit Examples
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3 Professional Liability Lawsuit Examples

Many small businesses are sued each year over professional mistakes (real or perceived). According to the US Chamber Institute for Legal Reform, 43 percent of small-business owners were either involved in or threatened with a lawsuit in 2013. A Small Business Administration report [PDF] found that litigation alone costs ranged between $3,000 and $150,000. That doesn't include how much a lawsuit might cost your business in time or reputation damage.

Doctors, lawyers, and accountants aren't the only people who can get sued over professional errors. In fact, professionals of all stripes can be held responsible for:

  • Oversights and errors.
  • Undelivered services.
  • Services that don't live up to industry standards.

The following real-life cases show you how easily your business could be targeted.

Professional Liability Lawsuit over Administrative Errors

Professional Liability Insurance can cover mistakes over administrative and clerical errors, including ones your employees make. Here's an example.

In the 2009 Florida case Estate of Tinervin v. Nationwide Mutual Insurance Company, the court found…

  • A medical assistant who misplaced a lab report and failed to show the lab results to the doctor (her boss and husband) delivered "professional services" even though the acts were merely clerical.
  • Most professional services involve clerical duties that may lead to liability. Even if a secretary or assistant performs the duty, the professional is ultimately responsible.

The business owner in the case only had a Business Owner's Policy, which doesn't cover lawsuits over professional mistakes. Only Professional Liability Insurance can cover those costs.

Professional Liability Lawsuit Involving Business Partners

Professional Liability Insurance can also protect your assets when a business partner is unsatisfied with the work you produce. For instance, in the 2008 Arizona case American Casualty Co. of Reading v. Kemper

  • A counselor working as an independent contractor for a psychological services clinic allegedly made defamatory statements about her employer's billing practices and their business relationship.
  • The court rejected the argument that the counselor only owed a duty to her clients. It found that her statements about her employer were within the scope of her "professional services" for the clinic.

As part of the counselor's out-of-court settlement with the clinic, she agreed that the clinic was entitled to damages. Professional Liability Insurance can cover this type of legal expense.

Professional Liability Lawsuit over Negligent Work

This final example shows how Professional Liability Insurance can protect experts when they are accused of negligent work. According to Biz Times Milwaukee

  • Novum Structures filed a lawsuit against Larson Engineering, alleging the firm failed to check its calculations on an enclosed glass atrium before approving the start of construction.
  • As a result of the miscalculations, welds in the atrium didn't meet load requirements.

The complaint alleges the cost to fix the problem was $5 million.

The report notes that the Larson Engineering's professional liability insurer is also named in the suit, so the firm likely has coverage for its legal costs. Learn more about the costs Professional Liability Insurance can cover in "Professional Liability Insurance Defined: Who Needs It and How It Protects Small Businesses."

When Does Professional Liability Coverage Apply?

Professional Liability Insurance (sometimes known as Errors & Omissions Insurance or Malpractice Insurance) usually applies when someone alleges you did your job improperly. The legal definition of "professional services" varies from state to state.

Whether an act or oversight qualifies as a "professional service" depends on the circumstances of the case. However, as the examples above prove, courts have ruled that a variety of seemingly simple mistakes can qualify as "professional services."

Any business can end up on the wrong end of a professional liability lawsuit. Make sure your business is prepared.

Professional Liability Insurance: Further Reading

Professional Liability Insurance in the Insureon Blog