Attorney Kenneth Rubinstein of Preti Flaherty and Willis North America’s Michael Balmer, both based in Boston, are sounding an alarm about what can happen to you if your firm’s services are found to have fallen short of the profession’s standard or care.
You can be sued, and lose.
Watch out for the gaps in your errors and omissions professional liability insurance, especially exclusions which can limit or even prejudice coverage—meaning, convince a judge to rule against you. Also, BIM can blur roles and designers “may find themselves without coverage if they don’t have the appropriate insurance agreements with an up-to-date insurance policy form,” say Rubinstein and Balmer.
Disgruntled shareholders and bankruptcy trustees are also more likely to hold directors and officers personally liable for disappointing performance or bankruptcy, they add. “In certain situations a company is legally bared from indemnifying its executives or employees."
“Not all D&O policies are alike,” say Rubinstein and Balmer. “Some bankruptcy courts have barred individual executives from using policy funds to pay legal defense fees in order to preserve the policy funds for the company’s creditors. As a result, executives are forced to use their own assets to defend themselves, often facing six-figure legal fees.”
Gulp. Six-figure legal fees. That’s the phrase none of us want to hear. Let’s come back to this discussion again soon.
Thanks, Ken and Mike.