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Professional Liability

Suit over Breach of Medical Records Confidentiality Not Preempted by HIPAA and Not Subject to Medical Professional Liability Act Hospitals and other health care providers are subject to suit for damages where medical records are released in violation of HIPAA regulations, under R.K. v. St. Mary’s Medical Center, released by the Supreme Court of Appeals of West Virginia on November 15, 2012. The court reversed the dismissal of a complaint alleging breach of medical record confidentiality and held the action (1) was not preempted by HIPAA, and (2) not subject to the limitations of the West Virginia Medical Professional Liability Act. The court’s opinion can be downloaded from its website here. view more
Preemption Under the Dodd-Frank Act Preemption standards under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") are among the most controversial aspects of the new law, and there continues to be disagreement as to the proper interpretation. Although the implications of Dodd-Frank are unclear, OCC regulations and subsequent cases provide some guidance, with most decisions supporting the OCC's final rule that Dodd-Frank view more
Are You Driving Your Adjuster Clients Crazy? Ten Things Lawyers Do That Make Clients Want to Tear Their Hair Out Several high level, experienced claims personnel were recently asked to share their pet peeves about the lawyers with whom they work. The responses were surprising because many of their pet peeves are so obviously improper. Are you doing any of the things listed below? If so, it’s probably time to make some changes! Below are descriptions of some of the most common complaints with suggestions for alternative handling methods. view more
Equitable Subrogation and Negligent Title Searches: When Title Insurance Becomes Irrelevant Title insurance serves the purpose of protecting "a transferee of real estate from the possibility of a loss through defects that may cloud the title." 9f-201f Appleman on Insurance § 5201. Notwithstanding the availability of insurance for precisely such a risk, courts in several states have relied on equitable principles to overlook defects in title without need for triggering title insurance policies. The spike in foreclosures over the last half-decade has resulted in a tremendous amount of recent litigation on these very issues. This article will examine how certain jurisdictions view the purpose of title insurance in these disputes, and under what circumstances a title insurer's failure to discover an existing lien will be excused. view more
D&O SLG: An Update from California on Officers’ Liability with a Quick Tale of Two Statutes In two recent decisions, courts in California analyzed two statutes against the prospect of corporate officer liability, and have reached two very different outcomes. In FDIC v. Hawker, No. 12-0127, 2012 WL 2068773 (E.D. Cal. June 7, 2012), the court ruled that California's statutory business judgment rule could not be applied to absolve corporate bank officers from liability for alleged negligence and breach of fiduciary duty. On the other hand, in Sandler v. Sanchez, 206 Cal. App. 4th 1431 (Cal. Ct. App. June 18, 2012), the court determined that the California statute providing for the designation of a responsible corporate officer for real estate brokers, section 10159.2 of the Business and Professions Code, could not be used as the basis for making the designated corporate officer personally liable to third parties dealing with an agent of the brokerage. view more
State Deceptive Trade Practices And Consumer Protection Acts: Should Accountants Be Held Liable? Recently, there has been a recent increase in the number of state deceptive trade practice and consumer protection act claims being asserted against accountants either separately or in conjunction with negligence, breach of contract, or breach of fiduciary obligation-based malpractice claims. Virtually every state in this country has enacted a deceptive trade practices act or a consumer protection statute. These statues vary from state to state, but they all have the same basic purpose – protection of the public from unfair or deceptive acts or practices with respect to the sale of goods or services. It is within the context of those who supply services, rather than goods, that the greatest amount of debate has occurred among the various states and their judicial tribunals.  view more
Professionals Sued For Expert Witness Work: When Does Witness Immunity Apply? In addition to their work for their own clients in their own areas of expertise, some professionals also serve as expert witnesses in litigation. They employ their knowledge and experience in their chosen field to analyze issues and render opinions for one or more parties to a lawsuit. Like in any other aspect of their work, a professional serving as an expert can act negligently and make mistakes. Sometimes these mistakes cause litigation problems for the party the professional has been retained to assist. What happens when the professional is sued for his or her work as an expert? What are the public policy implications of holding an expert witness liable for mistakes made in the litigation or conversely rendering the witness immune from suit? view more
Illinois Considers New Exception(s) to Statute of Repose for Claims Against Attorneys On February 1, 2012, Illinois Senate Bill 2952 (the "Bill") was introduced to create new exception(s) to the statute of repose for attorney malpractice that currently limits actions to no later than six years after the date on which the attorney's act or omission occurred. As introduced, the exception would apply: (1) if the client is still represented by the attorney; or (2) the attorney knowingly conceals the act or omission giving rise to the claim. In such cases, the "period of limitations" would not begin to run until: (1) the person is no longer represented by the attorney; or (2) the client knows or should have known of the injury. See full text ofSB2952 at http://www.ilga.gov/legislation/.  view more
What to Do When Your Supervising Partner Makes a Mistake As we all know, everyone makes mistakes—even supervising attorneys. Learning how to address mistakes may be a challenging task but, once mastered, will only help to build rapport and strengthen your working relationship with your supervising attorneys, along with helping to avoid a potential disciplinary action under the Model Rules of Professional Conduct. This article will offer suggestions for addressing your supervising attorney’s mistake in a professional and respectful manner, while discussing the importance of doing so under the Model Rules. view more
The Hammer Clause: The Little Known But Extraordinarily Important Part of Your Professional Liability Policy Given that the majority of the readers of this fine newsletter are professionals working tirelessly in their respective fields, it may make sense to take a breather and once again dust off your professional liability policy to examine the small but important details contained in it. This article will start with the premises that your policy provides for an adequate dollar amount coverage in the unfortunate event you or your firm winds up on the wrong side of the "v." It also presumes that your deductible or Self-Insured Retention (SIR) is within the dollar range such that you or your firm can comfortably defend the claim before your policy limits begin to cover the claim.  view more
To Arbitrate Or Not To Arbitrate: That Is The Question In professional services agreements and engagement letters, it is not uncommon to find a variety of dispute resolution provisions. These vary from a requirement that the parties mediate before filing suit, to shifting attorney fees depending on which party's offer at mediation turns out to be closest to the ultimate award, to simply fixing venue and jurisdiction in a particular court. This article discusses the pros and cons of arbitration provisions in professional services agreements in general, recent court decisions impacting the enforceability of arbitration provisions, and suggestions for the type of arbitration provision that provides the most flexibility to the professional and/or the professional's liability insurer. view more
Sputtering Housing Market Makes Fertile Ground for Real Estate Professional Liability Claims Two undeniable and interconnected facts: the U.S. housing market remains virtually stagnant and the number of lawsuits against real estate professionals is on the rise.  Existing home sales have dropped steadily since 2005.  There is a glut of product on the market, yet relatively few ready, willing and able buyers.  During the same period, delinquency and foreclosure rates have grown at an alarming rate.  Real estate professionals have been under considerable pressure to adapt to the conditions of this weak and sputtering market.  Many have not fared so well, as there has been a noticeable increase in lawsuits filed against agents, brokers, inspectors and other real estate professionals.   view more
Malpractice vs. Misconduct Suppose your client, a lawyer, has been sued for malpractice. Could the alleged malpractice be a basis for discipline? Alternatively, is a disciplinary complaint likely to give rise to a malpractice suit? This article will attempt to shed some light on the distinction between attorney malpractice on one hand and professional misconduct on the other, as well as the types of conduct that may constitute both.



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Bernie Madoff and Auditor Liability: Emerging Trends and Defenses

Acting upon a tip that his investment advisory business was a fraud, two special agents with the FBI met with Bernard Lawrence "Bernie" Madoff in his $7 million Manhattan penthouse on December 11, 2008. According to Special Agent Theodore Cacioppi as set forth in the securities fraud complaint:

After identifying myself, Madoff invited me, and the FBI agent who accompanied me, into his apartment. He acknowledged knowing why we were there. After I stated, "we're here to find out if there's an innocent explanation," Madoff stated, "there is no innocent explanation." Madoff stated, in substance, that he had personally traded and lost money for institutional clients, and that it was all his fault. Madoff further stated, in substance, that he "paid investors with money that wasn't there." Madoff also said that he was "broke" and "insolvent" and that he had decided that "it could not go on," and that he expected to go to jail.

United States v. Madoff, No. 08 MAG 2735 (S.D.N.Y. Dec. 11, 2008).

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Dog Fight: Utilizing Summary Judgment as a Weapon in Defense of Meritless Professional Liability Cases Upon receiving a file to defend a professional liability claim, one of the first things attorneys do is start to consider interrogatories and requests for production in hopes of quickly ferreting out the issues in the case.  The limited goal with early interrogatories and requests for production is to provide an opportunity to assess the case with a fairly complete understanding of the plaintiff's position and the facts upon which that position is based.   With appropriate responses to the interrogatories and sufficient documentation, these early discovery responses can be used to set the strategy for the case and focus the issues.  view more
A Settlement “Agreement” Equals No Subsequent Legal Malpractice Claim, Right? Not So Fast! A common thought among most attorneys upon receiving settlement authority from their client and subsequently entering into a settlement agreement on that client’s behalf is to move on to the next case and not appreciate the possibility of that same client suing for legal malpractice. However, these events are becoming all too common, especially now with the country experiencing difficult economic times.  view more
How Good Lawyers Get Fired Over the past three years, I have had five different cases transferred to me in mid-stream from five different law firms.  In addition, several new clients come to our firm because they were dissatisfied with their previous lawyers.  While I am always grateful for the opportunity to assist existing clients with troubling cases or to work with new clients, I never look forward to the initial conversation with the lawyer from whom a case is being transferred.  (To the credit of the attorneys whom have transferred cases to me, they have always done so professionally and they always have been courteous and helpful to me.) When I mention to my partners or other good friends who are attorneys the names of the lawyers from whom these cases have been transferred, I often get a puzzled look and a comment of, “Wow, that person is a really good lawyer.  I wonder why the client transferred the case.”  I have even had the transferring attorney ask me why I thought the case had been transferred from them.  These situations beg the question “How do good lawyers get fired?”   view more
Can Fiduciary Duty of a Real Estate Broker Extend to a Non-Fiduciary Real Estate Agent? When a real estate agent commits a wrong, the broker is vicariously liable for that agent’s wrong. When a real estate agent is in a fiduciary relationship with the principal client then the responsible broker becomes a fiduciary to the same principal client. However, what happens when the broker is a fiduciary through the relationship of one agent, yet it is the other agent who while working for the broker commits the wrong? Can the aggravated client argue that since the broker is a dual broker and it owes a fiduciary duty to the client, then that fiduciary duty transcends to the other agent? Can derivative liability act in reverse? The answer to those questions must be ‘no,’ since arguing otherwise will turn the logic of fiduciary duty on its head.  view more
Can Fiduciary Duty of a Real Estate Broker Extend to a Non-Fiduciary Real Estate Agent? When a real estate agent commits a wrong, the broker is vicariously liable for that agent’s wrong. When a real estate agent is in a fiduciary relationship with the principal client then the responsible broker becomes a fiduciary to the same principal client. However, what happens when the broker is a fiduciary through the relationship of one agent, yet it is the other agent who while working for the broker commits the wrong? Can the aggravated client argue that since the broker is a dual broker and it owes a fiduciary duty to the client, then that fiduciary duty transcends to the other agent? Can derivative liability act in reverse? The answer to those questions must be ‘no,’ since arguing otherwise will turn the logic of fiduciary duty on its head.  view more
Plaintiffs, Meet Thy Since 1994, private plaintiffs have sought ways around their inability to charge defendants with aiding and abetting securities fraud violations under the Securities and Exchange Act (the "Act"). In that year, the Supreme Court held that a plaintiff's private right of action under Section 10b of the Act (and/or corresponding Rule 10b-5) does not include suits against aiders and abettors. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994). Essentially, under Rule 10b-5, one may not knowingly (or in some circuits recklessly) make a false statement in an effort to effect the purchase or sale of a security. Practically speaking, Central Bank stands for the proposition that a plaintiff may not sue a bank or accountant in its advisory capacity to those fraudulently violating the securities laws.  view more
The Demise of Contributory Negligence in Professional Liability Cases The common law doctrine of contributory negligence enjoyed a relatively short life and appears to be currently dying a slow death in American jurisprudence. In theory, the doctrine seemed to be predicated on sound legal logic. A party should not be able to recover when his own negligence is determined to be a contributing factor to his injuries. However, as an absolute bar, in some instances the defense produced lopsided results which were disfavored by courts. For example, a driver who fails to apply his turn signal prior when making a right turn at an intersection could be barred from recovering from an intoxicated driver who rear-ends him at a high rate of speed resulting in catastrophic injuries. Courts were clearly unsatisfied with such results especially in light of the philosophy that negligence actions are premised on the culpability of the parties. This displeasure with the all-or-nothing system eventually led to the creation of comparative fault systems that are designed to apportion a plaintiff's recovery based on the allocation of fault of the parties. To date, all but five jurisdictions have adopted some form of comparative fault. view more
Negligent Misrepresentation by a Professional: Who Can Sue? When a professional is sued by a person or company with whom he or she has a contract, such privity will generally form the basis for the professional’s duty of care. However, in many situations a professional provides information that can be obtained and used by parties with whom the professional has no contract. In many cases, the professional is aware that a third party intends to and will use the information provided in entering into a transaction or making some business decision. In other situations, however, the professional may not realize that his or her work is being provided to others. Should the information prove false or incorrect, what is to stop any user of that information from pursuing a claim against the professional for damages the user incurred as a result of the incorrect information?

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Does Comparative Fault Eclipse Job-Site Accident Indemnity?

When accidents with injury occur on a job-site and a lawsuit is filed, the contractual allocations for job-site safety become paramount.  Faced with such litigation, it is also not uncommon that a design professional (and his or her attorney and insurer) evaluate whether or not there is the potential to receive defense and indemnity from other project participants with specific job-site safety responsibilities.

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The <i>Janus</i> Decision The U.S. Supreme Court recently ruled in the Janus Capital Group case that the legal entity or person actually making an allegedly fraudulent statement in a public securities offering, and only that person, can be held liable under Securities and Exchange Commission (SEC) Rule 10b-5, in a private securities fraud action. In declaring that only those entities that have "the ultimate authority" over a statement may be held liable in private action, the Supreme Court has created a bright line test to determine who can (and cannot) be held liable for allegedly fraudulent statements under the federal securities laws.  view more
Seven Legal Sins During a recent week of depositions, I had the pleasure of spending time in downtown Riverside, California. Located on Main Street in the midst of an open pedestrian area is a beautiful and inspiring memorial to Mahatma Gandhi. One section of the memorial is a bordered walkway leading down to the visually unique statue of Gandhi—which, as you circle it, provides a montage of his life and displays images of other champions of nonviolent demonstration. As you walk toward the statue, you are met with some of Ghandi's more provocative statements. Some of these statements are quite succinct and powerful. For instance: "Live simply so others may simply live. . . ," and "An eye for an eye makes the whole world go blind." One of the selected statements is a bit more expansive, but through it, Ghandi identifies with distinct and efficient clarity the seven sins one may find in the world. Given that Ghandi's first efforts to champion civil rights occurred while he was an expatriate lawyer in South Africa, we lawyers should consider what might be described as seven legal "sins."  view more
The Lawyers' Litigation Privilege In the television series Damages, plaintiffs' class action lawyer Patty Hewes has a fondness for leaving no stone unturned in the quest for her version of justice. Hewes' zealousness means that she is willing to do and say nearly anything to vindicate her clients both in and out of court. How does she get away with it, besides the obvious answer that her acts are fiction conjured up to entertain audiences? If such action occurred in real life, one would suppose that a long line would form outside the courthouse door with her adversaries eager to turn the tables by bringing litigation against her for her outlandish claims and charges. However, Hewes' best defense would simply be that her conduct has long been protected from suit by what is known as the litigation privilege. view more
I Have Been Sued—What Does a Lawyer Do Now? Every year, numerous attorneys in private practice are faced with the potential of having to defend against a legal malpractice claim. While, as with most litigation, the vast majority of these claims are settled, the associated expense can often be substantial. With legal malpractice claims and settlements reaching into the tens of millions of dollars, and with attorneys facing juries who are frequently hostile to their defenses, the practice of defending legal malpractice claims is one that provides unique challenges.  view more
Back to Basics: Identifying Opportunities for Early Dismissals

Professional liability claims come in all shapes and sizes. The fact-intensive nature of most of these cases is a defining characteristic that can make it extremely difficult to resolve them through early dispositive motions. However, close scrutiny of a complaint, with an eye toward the essential elements of plaintiff's cause of action, can provide opportunities for early dismissals in these otherwise discovery-intensive cases. 

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The Audit Interference Rule: Alive and Kicking? The audit interference rule appears to "alive and kicking" in modern accounting malpractice jurisprudence despite speculation of its demise. In accounting malpractice cases involving allegations of the failure of an auditor to detect embezzlement, the issue frequently arises as to the legal viability of a contributory negligence or comparative fault defense. The viability of such a defense is dependent on which of two approaches the particular jurisdiction chooses to follow: 1) the Craig rule; or, 2) the National Surety or "audit interference" rule.   view more
When Does a Design Professional Have Coverage Under a CGL Policy? Many design and construction contracts require architects and engineers ("Design Professionals") to maintain both a commercial general liability (CGL) insurance policy and a professional liability insurance policy. CGL policies are designed to protect the insured against liability arising out of bodily injury and property damage to third parties caused by an accident. On the other hand, professional liability policies cover damages caused by errors, omissions, breaches of the standard of care, or similar claims arising from the negligent performance of professional services. 
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Social Media and Word-of-Mouse Discovery Tips 4 Litigators The use of social networking websites (such as Facebook, MySpace, Twitter, etc.) has exploded in recent years. Facebook is currently the most popular of the social networking websites and boasts an estimated 500 million users. Indeed, it was recently reported that Facebook has surpassed Google as the most popular site on the Internet in 2010. Additionally, although social networking websites were once considered to be a pastime of the college crowd, the 35 and over demographic now represents over 30 percent of the entire Facebook userbase. view more
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