AXIS INSURANCE SERVICES, LLC: Professional Liability (E&O) Claims Scenarios

A real estate agent sold a building and, as part of the negotiations, was asked if the building was ADA-compliant. The leasing agent said yes and forwarded a copy of a report from the building manager attesting to its compliance. The building was a residential apartment complex and sold for $25 million. Later it came to light that it was an old report and, in fact, the building needed significant upgrades to become ADA-compliant ($3.5M in upgrades). The owner, selling agent, and consultant were all sued. The lawsuit was eventually settled for $3 million.

A software developer sold timekeeping software to a company. After removing all previous timekeeping clocks and installing software, the customer discovered it did not function properly. It failed to correctly apply the hourly and overtime rate of pay resulting in over and underpaid employees and the need to replace the original time clocks. The company sued the provider of the software for damages and expenses resulting in $550,000.

An insurance broker contacted a client and recommended an additional type of coverage to protect him against lawsuits by employees. The client told the broker he wasn’t worried about employee-related suits and that he also didn’t want to pay any additional premium. A loss occurred and a suit was filed by an employee. The insured claimed in court that the broker never mentioned any such coverage to him. The broker had no record in his files of any conversation, nor did he document the file by sending the insured a letter confirming the conversation. The client was awarded $1,000,000.

An accounting firm was hired to set up a client’s investment properties. The accountant assigned to the project mistakenly set up the investment properties as a corporation instead of a partnership. The client sued the accountant alleging losses for tax liability. The accountant had to pay the client $375,000.

A company provided consulting services to architects and developers for large live entertainment venue halls. After the construction of a symphony hall, the owner sued the consulting company and others, alleging the sound quality in the hall was defective. Defending the case was expensive because of the potentially high exposure for the plaintiff’s lost profits claim. The suit settled with the architect who had provided faulty specifications for the sound equipment paying the bulk of the settlement.