Accountants to Veterinarians: Professional Liability a Concern

Accountants to Veterinarians: Professional Liability a Concern

Issues arising from professional liability should be of great interest to professionals in today’s business environment. The general public has become increasingly aware of its legal and contractual rights and seemingly believe that a legal action may, and should, be initiated from any factual scenario that leads to an unexpected outcome. As lawyers, we are faced with these issues on a day-to-day basis – both from a preventative standpoint and in a representative capacity.

What is a professional?

Professionals are generally defined as those with specialized knowledge in a profession with labor and skill that is predominantly mental or intellectual, as opposed to physical or manual. The Virginia Code defines “professional service” as “any type of personal service to the public which requires as a condition precedent to the rendering of such service or use of such title the obtaining of a license, certification or other legal authorization and shall be limited to the personal services rendered by pharmacists, optometrists, practitioners of the healing arts, nurse practitioners, practitioners of the behavioral science professions, veterinarians, surgeons, dentists, architects, professional engineers, land surveyors, certified landscape architects, certified interior designers, public accountants, certified public accountants, attorneys-at-law, insurance consultants, audiologists or speech pathologists, and clinical nurse specialists.”

What is professional liability?

Although it can be considered a breach of a contract, professional liability generally arises where a professional is negligent, that is, where the professional breaches a duty of care to another person. For example, a doctor has a duty of care to a patient, and accountants, lawyers, engineers, architects, contractors and real estate agents have a duty of care to their clients. The duty is to perform the required task to the standard of skill, care and diligence of a reasonable person performing similar work. A person who suffers a loss because of a negligent act can make a civil claim for compensation for that loss.

Why be concerned?

It is a fact of life that mistakes and misunderstandings happen in business. An unsatisfied client can sue you or your business even if you believe there is no basis for it. Initially, you will be forced to seek and retain legal counsel. Defense costs can be significant, even for a single case. Also, if you were to lose a suit, you could be forced to pay damages or fines. Again, the costs could be high. Finally, the publicity generated by such an action, if negative, could be devastating to your business. You could lose some of your current clients or have difficulty attracting new ones in the future. It is important to note that, according to the Virginia Code, professionals have personal liability and cannot be protected from liability for professional negligence by a corporation.

What can I do to avoid professional liability?

Although certainly not an exhaustive list, the following suggestions can help limit your susceptibility to such a claim:

• Make sure that everyone is on the same page from the beginning – a simple “engagement letter” agreed to by all of the parties involved can help with differences down the road
• Involve good attorneys to review documents and provide advice in specific situations
• Limit your involvement to assignments or projects that are within your realm of expertise
• Have accountants review financial records and prepare tax returns on a regular basis
• Document your client files as extensively as possible; do not ignore continuing problems
• Be responsive to client needs and keep the client informed (i.e. return phone calls and letters)
• Buy plenty of the necessary insurance from a reputable company