5 Professional Liability Claim Scenarios

When you own a business, you have responsibilities you need to meet. You have to make sure your staff is taken care of, and you should operate your business ethically, for example. While you might have the best intentions, sometimes your business might be found negligent and cause another party to suffer losses. If this happens because you or an employee made a mistake, then you may have to pay them back for what they’ve lost. 

If your business is service-based, you are particularly at risk in this situation. If you make a mistake, then a client may have financial losses. In addition, the client may decide that they want compensation from you and bring legal action against you to attempt to do so. 

If this happens to your business, you could be on the hook for massive costs. First, you will have to pay for the losses, and then you may also have to pay for legal costs as a result of the claim. If those costs keep rising, then your business could be in trouble. One way to soften such a blow is with professional liability insurance. 

Professional liability insurance, otherwise known as errors and omissions insurance, will compensate for legal claims made against you for professional mistakes. However, it can be tricky to figure out what constitutes a coverable claim and what doesn’t. Every business and industry is different and comes with different risks. What follows are some scenarios that will help you understand what professional liability is. 

Requirements for a Professional Liability Claim

If someone wants to bring a professional liability claim against you, certain requirements must be met to succeed. It must be clear that there is an agreement between you and the other party for services. When you hear the term “duty of care,” this is what is being referenced. If there’s no evidence that you had any responsibility to provide a service, then they cannot bring a claim against you. 

Beyond that, they must also be able to show that you acted improperly. They can use the standards of your profession or even common sense. If you are a financial consultant of some kind, for instance, you may make mistakes from time to time. As long as you acted within your professional standards, you should be protected. If you have not, it could be considered a breach of that duty of care. 

Lastly, the client must have suffered a loss of some kind. This loss can be financial or physical. When looking at these criteria and applying them to individual cases, there is a lot of ambiguity. Here are some examples to help you wade through it all. 

Real Estate

A real estate agent may close deals that involve millions of dollars. A lot of paperwork is shared and examined so that there is an accurate picture of the condition of the property, the state of its ownership, and how to make sure everyone is protected. For example, a client asks you if a $30 million property is ADA compliant and you pass on paperwork to the clients that shows that it is, in fact, ADA compliant. The buyer then purchases the property. 

After the purchase, they discovered that the compliance report you provided was several years out of date and that the building was no longer compliant. The buyers were then on the hook for massive upgrade costs totaling millions of dollars. In addition, as the agent of the sale, you could be sued for not doing your due diligence. 

Architecture

An architect may be asked to design many types of buildings. Their designs must meet the client's specifications to properly serve the purpose for which they are being built. If an architect makes an error in the design, the client may have a claim against them. 

For example, an architect is asked to design a concert hall. The client wants to bring in musical acts and provide excellent sound quality for the acts and for the audience. However, the architect’s design incorporates material not properly suited for a concert hall. As a result, the sound quality is not up to the client's standards. They can then sue the architect for the losses in construction and revenue. 

Medical Malpractice

Medical malpractice is a unique situation since it involves physical liability and possible financial liability. This refers to errors made by medical professionals. One of the top reasons for medical malpractice is a misdiagnosis. This can refer to the doctor making a completely wrong diagnosis or delaying a diagnosis so that it causes harm. 

A patient may visit a doctor with persistent headaches. The doctor says to make sure to drink more water and prescribes some pain medication to help. However, the headaches worsen over time, and eventually, the patient is admitted to the hospital with more pains and symptoms. It turns out that the patient had a type of cancer, and the doctor failed to read the signs. As a result, the patient may have to deal with harsher treatments, more illness, loss of work, and possibly worse due to the oversight. They can then make a claim for their pain and suffering and the loss of wages. 

Legal Malpractice

Lawyers must be very careful about how they handle their clients and cases. For example, if a client hires a lawyer to help fight a personal injury case, the attorney must ensure that every requirement is met to make the claim. If the attorney misses a deadline, then it could result in the claimant being unable to get compensation for their injuries. The client will be left with huge financial costs, plus legal costs. They can then seek compensation from the attorney for their error so make things right. 

As you can see, there are many scenarios where a professional could be found liable for their mistakes. You must make sure that you protect yourself by preventing these errors in the first place and having insurance in place to cover you if something happens. The costs of a professional liability claim can be very high. If you are found to be in breach of your duty of care, then you could find your business in deep financial waters. So take care, and get your business protected.