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Professional Liability
Claims Scenarios
Professional Liability insurance covers crucial aspects of your
business and your interactions with your clients. Below are some
actual claims scenarios. You probably face similar professional
liability risks every day:
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A software
design error causes an MRI machine to be rendered inoperable,
allegedly causing loss of profit to the hospital.
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A client
contracts with a software consultant to develop a software
system. The contract contains specific benchmarks for speed and
other requirements. These benchmarks are not reached, allegedly
as a result of the negligence of the consultant. The consultant
is sued in negligence, breach of contract, and negligent
misrepresentation for loss of profit.
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A plaintiff
purchases from a telecommunications specialist a piece of
hardware, a digital telecommunications switch. The contract also
calls for the specialist to connect the switch to the purchasers
networked computer system, and to provide maintenance. Several
months after installation, the switch fails, causing the
purchaser significant down time. The customer sues, alleging
lost revenue and loss of reputation. The question arises as to
whether the failure was due to faulty design or manufacture of
the switch, or due to the failure of the specialist to
adequately connect the switch to the network or to provide
proper maintenance services.
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While
transferring data from a legacy to web based system, a database
is compromised, resulting in the loss of valuable corporate
sales information.
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A software
developer is sued when, during the execution of a contract to
build an Internet application for a company, the developer is
allegedly negligent in the staffing of the project, which
resulted in an alleged breach of contract.
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A virus attacks
your computer system and your company is unable to fill customer
e-commerce orders for an entire
month. Your company has lost an estimated $500,000 in revenue.
The inability to fill customer orders cost one
customer $250,000 in revenue because they relied on your company
to supply a critical widget; they sue to recoup
the losses.
Employment Practices
Claims Scenarios
CALIFORNIA
The Human Resources Director at a surgical instrument
manufacturer initially brought a charge and subsequently, a
lawsuit against the company alleging sexual harassment,
retaliation and wrongful termination. The case was
unsuccessfully mediated twice with plaintiff's demand over
$500,000; the suit was dismissed on a motion for summary
judgment. Plaintiff appealed the dismissal which was upheld.
Defense costs: $167,000
Length of time litigated: 2½ years
A class action was brought against a major clothing manufacturer
alleging discrimination, wrongful termination and various FLSA
violations. The class were employees of sub-contractors of the
company. The company was sued as a joint employer under
California law. The allegations against the company survived six
demurrers. The case was finally settled at mediation. The female
executive claimed that she was sexually harassed by more than
one officer of the company. She alleged that the harassment was
verbal and physical in nature and was done publicly to humiliate
her. The male executive claims that he protested the harassment
against the female executive and was retaliated against. The
timing of the employees' termination was troublesome as they
came on the heels of the complaints. The case was settled at
mediation after a protracted discovery battle.
Settlement Amount: $1,050,000
Defense Costs: $490,062
A former Executive Officer alleged to have been interviewed by
insured and its past company and recruited from out of state for
a position with inaccurate information as to the insured's
financial stability as well as the stability of the product line
which the plaintiff was to manage. Plaintiff contended he was
assured that there was a long-term commitment to the product
line he was to manage. Plaintiff was terminated from his
position after just two (2) months, following the insured's
decision to discontinue the product line for which plaintiff was
hired. Plaintiff was earning $250,000 per year. Initial demand
was $2.5M.
Settlement Amount: $215,000
Defense Costs: $92,000
A former dispatcher for the insured's trucking company sued in
state court for alleged wrongful termination and retaliation.
Plaintiff alleges to have been terminated in retaliation for
co-operating with the Department of Transportation in an
on-going investigation of alleged violations concerning
overtime. Plaintiff has made an initial demand of $2.5M.
Two former waitresses at the insured's restaurant sued, alleging
to have been sexually harassed by their former supervisor. Both
plaintiffs's alleged to have complained to the restaurant
manager and contested that no investigation was conducted and no
remedial action was taken. Plaintiffs sought compensatory and
punitive damages as well as attorneys' fees.
Settlement Amount: $75,000
Defense Costs: $52,000
Plaintiff, a high-tech machinist, alleges to have been
wrongfully terminated after returning from a twelve (12) week
absence to care for his mother, pursuant to the Family Medical
Leave Act. Plaintiff has sued in State Court and seeks front and
back pay damages along with reinstatement.
Current demand is $175,000.
Plaintiff, an advertising manager, alleges to have been
wrongfully terminated and discriminated against due to his
religion. Plaintiff contends that he was entitled to take thirty
(30) days off of work following the death of his mother in
accordance with his religious beliefs. Plaintiff contends that
the insureds bereavement policy discriminates against his
religious beliefs and seeks compensatory and punitive damages as
well as attorneys' fees. Plaintiff has
made an initial demand of $200,000.
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