REPORT OF THE COMMITTEE ON PROFESSIONAL, OFFICERS' AND DIRECTORS' LIABILITY LAWAuthor(s): Ronald E. MallenSource: The Forum (Section of Insurance, Negligence and Compensation Law, American BarAssociation), Vol. 16, No. 1, Special Issue (1980), pp. 97-99Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/25761627 .

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REPORT OF THE COMMITTEE ON

PROFESSIONAL, OFFICERS' AND DIRECTORS' LIABILITY LAW

This has been a year of substantive tasks for our Committee. Our pri mary activity has been developing a program for the annual meeting which is intended to provide a base and orientation on professional liabil

ity for the coming years. We have put together, with assistance from our co-sponsor, the Pro

fessional Liability Committee of the Litigation Section, what we believe will be one of the most informative and exciting programs on the broad

spectrum of professional liability. The effect of advertising, specializa tion and the potential for warranty liability will be examined by one of our Vice Chairmen, David J. Back of Houston, Texas. Bert Thompson, who is General Counsel for Shand, Morahan & Company in Evanston, Illinois will be examining professional liability insurance in the 1980s and presenting a wealth of factual detail as to the realities of insuring the professional. We have then planned to examine those areas which bode most ominously for the professional in the 1980s. A very qualified and well-prepared panel will be examining the various aspects of liabil

ity to non-clients, judgmental liability?immunity and the rapidly chang ing standard of care: accountants: Gene Mesh, Cincinnati, Ohio; agents and brokers: Jack Swanston, New York, Ne\V York; architects and en

gineers: Professor Jerry J. Phillips, University of Tennessee; attorneys: Ronald E. Mallen, San Francisco, California; and physicians: James J.

Leonard, Jr., Phoenix, Arizona. In addition to the speakers' oral partici pation, each has prepared a well-written and extensive paper on their

subject. We are planning to co-sponsor with the Standing Committee on Law

yers' Professional Liability, a National Institute on the subject of loss

prevention for attorneys. We have obtained commitments from speak ers, and are presently seeking a location and date for the program.

Several of the papers which were presented at the 1979 annual meet

ing on Accountants' Liability have been published in the Forum. We are coordinating efforts with The Brief to do a profile on our Committee

in the fall of 1980. As is reflected in the theme of this year's program at the general meet

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98 THE FORUM

ing, the developments in the professional liability field have been explo sive. In the area of legal malpractice, the 6th Circuit in Woodruff v.

Tomlin, 616 F.2d 924, adopted a form of judgmental immunity for the trial lawyer. However, the size of adverse judgments against lawyers continue to increase. In the spring of 1980 in Togstad v. Veseley, Otto,

Miller &- Keefe,_Minn_, 291 N.W.2d 686, the Minnesota Su

preme Court upheld a judgment against a lawyer in excess of $600,000 for negligently investigating the merits of a medical malpractice claim and advising the client that the claim was not worth pursuing. In May of 1980 a Lucas County Common Pleas jury in Ohio returned a record

$2.35 million judgment against lawyers for failing to file a timely law suit against an automobile manufacturer and driver. This record lasted

only one month when in June a jury in San Francisco, California re turned a verdict for $3.55 million against attorneys for allegedly neg lecting the interests of a plaintiff who had contributed money towards the prosecution of an antitrust lawsuit by the lawyers on behalf of others.

In the medical field there has been an ongoing stream of cases head

ing towards a national standard of care for physicians. Recently, the Florida Supreme Court concluded that the practical operation of the

jurisdiction's pretrial medical mediation panel was unconstitutional. Aldana v. Holub, 381 So. 2d 231 (Fla. 1980). In Ohio, hospitals can he held liable to third parties for negligently releasing a dangerous pa tient. Leverett v. State, 399 N.E.2d 106 (Ohio App. 1978). Numerous decisions continue to expand the exposure of physicians for failing to

provide informed consent. Accountants received some good news in a Louisiana Federal District

Court decision which held that an accountant cannot be liable under the Investment Advisor's Act for advice which was rendered in his capacity as an accountant. Crabtree Aztec Enterprises, Inc., 479 F. Supp. 448

(M.D. La. 1979). The Ninth Circuit also held that accountants could not be liable under Section 10(b) of the Securities Exchange Act of 1934 for

failing to inspect trust deeds which secured debentures held by the

plaintiff mutual funds where that conduct was only negligent. Pegasus Fund v. Laraneta, 617 F.2d 1335 (9th Or., 14 Feb. 1980). A Federal court in New York, finding no securities violations, refused to find a

duty towards their non-client who was foreseeably injured by the ac countant's neglect. Competitive Associates, Inc. v. Aventhol, et al., 478 F. Supp. 1328 (S.D.N.Y. 1979). Despite these few encouraging deci

sions, the volume of litigation against accountants, particularly under the federal securities laws, does not appear to have diminished.

*

Standing to sue, privity, was a common theme in the engineering architects cases last year. Several courts have permitted contractors to sue architects for negligent conduct towards the architect's client de

spite the lack of privity of contraot with the contractor. E.g., Davidson &

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Professional, Officers' and Directors9 Liability Law 99

Jones, Inc. v. County of New Hanover, 255 S.E.2d 580 (N.C. App. 1979); Shoffner Indus. v.W.B. Lloyd Const., Co., 257 S.E.2d 50 (N.C. App. 1979). The expanded privity test was also applied in favor of a home owner against an engineer hired by his contractor. Luciani v. High, 372 So. 2d 530 (Fla. App. 1979).

Our committee has sought to more effectively utilize its expertise as to other activities of the Section. We have taken advantage of our sev eral well-qualified vice-chairmen who have undertaken liaison functions with the Membership Committee, the various publications as well as

particular projects and inquiries which have arisen during the year. At our business meeting scheduled for 6 August we shall examine and evaluate the activities we have undertaken and determine in what other

respects we can continue to expand our effectiveness.

Respectfully submitted, Ronald E. Mailen Chairman

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