DIRECTOR’S & OFFICER’S LIABILITY
The SEC alleges that a certain D&O misled investors into believing that the company’s technology gave it a considerable advantage over its competitors and falsely claimed that major companies had already placed orders. The SEC further alleges that the D&O promoted the company to potential investors in exchange for undisclosed commissions.
A company that provides medical billing services to a certain client is paid a set percentage of the amount it bills. A Medicare audit of the client determines that over a $1 million worth of services was improperly billed to it. The client is forced to repay Medicare and the company is forced to repay the commissions. While this investigation is going on, the company conducts a round of financing but fails to mention that its cash flow could be greatly hindered should it be required to repay the commissions. An investor in that round of financing alleges breach of fiduciary duty and fraud when the company is incapable of paying interest on the security.
EMPLOYMENT PRACTICES LIABILITY
Executives of a company receive documentation from an employee that provides details on the company’s non-compliance with the Food and Drug Administration (FDA) regulations. The plaintiff alleges that he was improperly terminated because they notified the company executives that FDA regulations were being violated. The plaintiff asserts that the company fabricated allegations regarding their “misconduct” and “deficient performance” and used the false allegations as pretext for termination.
A temporary staffing agency received notice of a BIPA claim in 2020 for failure to disclose the collection of Biometric Information to applicants. As a result of not obtaining proper release forms from their over 5,000 placed applicants they are going through a class action lawsuit.
An attorney for the seller of a construction company developed a sales contract that included representations about past revenue performance. The attorney did not complete proper due diligence with the sellers accounting firm, and as a result, revenues were overstated. The construction company performance, after the sale, was 50% off of projections, and the seller sued.
The Insured firm prepared the claimant’s 2018 and 2019 personal tax returns. The Insured subsequently discovered an error on the returns: passive activity income should not have been netted against the claimant’s wife’s losses. After the Insured filed amended returns, the IRS assessed penalties and interest of $11,253. The Insured’s policy covered the claimant’s penalties and interest
A company desktop and server is hacked and stops functioning. Later the company received an email, which states that the sender of the email can decrypt the company’s data for a price. Specifically, the price would be 5 Bitcoins in 24 hours, 8 Bitcoins if the company needs more than 24 hours but less than 48 hours to pay, and 14 Bitcoins if the company needs more than 48 hours to pay.
In March 2019, the CEO of a UK energy provider received a phone call from someone who sounded exactly like his boss. The call was so convincing that the CEO ended up transferring $243,000 to a “Hungarian supplier” — a bank account that actually belonged to a scammer.
MISCELLANEOUS PROFESSIONAL LIABILITY
A human resources consultant was retained by a large company to screen potential candidates for a senior managerial position. The company dismissed the chosen candidate after less than a year and was sued for wrongful termination. The company in turn commenced a third party claim against the human resources consultant, alleging that he had failed to conduct a thorough background check on the candidate.
A cosmetic company retained a chemist to provide a formula for lipstick. The chemist prepared the formula without verifying it, and provided it to the cosmetic company to begin production. The cosmetic company later sued the chemist alleging that the formula did not produce the desired lipstick product rendering it unmarketable.
MEDICAL MALPRACTICE LIABILITY
A laser treatment center provided services to a plaintiff for damaged skin. During treatment by an employee of the organization, the plaintiff suffered severe first degree burns to her face and neck that resulted in permanent scarring.
A patient of an eye doctor received incorrect eye drops during a routine procedure. The patient subsequently required regular treatments and suffered permanent damage to the eye.
INSURANCE AGENTS E&O
An insurance broker was mandated by his client to obtain an errors and omissions policy for his employees (nurses) who worked as case managers for insurance companies. Instead, the broker provided a policy which covered nursing services only. After coverage was denied by the insurer for a claim against one of the employees, the client commenced a lawsuit alleging the broker failed to provide the proper coverage.
An insurance broker obtained personal and vehicle information from the client for the purpose of obtaining a new auto policy. However, the broker failed to submit the application to the auto insurer and subsequently, a policy was never issued. After the client and his passengers were involved in a motor vehicle accident, the injured passengers sued the client, who then initiated a claim against the broker, alleging breach of duty in failing to obtain coverage.
A developer commenced an action against an architect when it was found, after review by the city’s planning committee that two planned duplex units could not be built without major strengthening of the foundation. This process resulted in high cost due to the unstable nature of the site. The developer claimed for loss of land value, loss of profit and interest, delays in obtaining city approval and non-completion of the project.
Changes to a civil engineer’s recommended excavation method for a damaged municipal drain resulted in drain collapse when inappropriate backfill processes were used. The engineer was sued by the municipality for insufficient field review where the backfill process could have been corrected in time to avoid damage.
Real Estate Agent
A developer of a residential lot in a new resort alleged that its real estate agent misrepresented the number of lots already sold and also failed to reveal delays in construction for common areas. The developer claimed it sold less lots than expected and, in turn, did not have the money to build the clubhouse, pools and pavilion. Without these amenities, the developer’s lot is allegedly rendered worthless.
A borrower secured financing to purchase a home from a bank and agreed on a closing date. Prior to closing, the borrower discovered financing was not be available. As a result, the purchase could not by the agreed-upon deadline. The borrower was forced to find replacement financing at unfavorable terms.
Commercial Real Estate Agent
A sub-lessee filed a lawsuit against their real estate agent and sub-lessor alleging breach of contract, negligent misrepresentation and breach of fiduciary duty after being forced to vacate for not using the property within its intended purpose. The sub-lessee claimed that the real estate agent did not (1) review the master lease, (2) mention that the master lessor had to approve of the sublease and (3) disclose that the sub-lessor was not the actual property owner.
An insurance company filed a lawsuit against a property manager who helped procure insurance for a property owner. The insurance company paid out two large tenant habitability claims and, after settling, accused the property manager of fraud, intentional misrepresentation and fraudulent inducement. Allegedly, the property manager failed to disclose prior claims against the property owner when applying for insurance. The property manager denied the allegations.
An appraiser (the insured) evaluated a property for a value greater than 10 million dollars; an individual (the claimant) relied on the appraisal when securing a bank note and deed of trust. After defaulting, the claimant discovered that the property’s value did not adequately secure the bank note. The claimant alleged negligence stating that the appraiser grossly overstated the property value, which was relied on to secure the bank note.
After the retirement of a company comptroller, his replacement noticed an unusual recurring monthly payment that had been made over the previous few years to an unknown recipient for tens of thousands of dollars each. Later it was revealed that the former comptroller would take advantage of the elderly owner of the company by having him sign these fraudulent checks (the funds went to the perpetrator/former comptroller in a roundabout way) on the days in which the CFO was not present. The owner was not aware of the deceit, and the perpetrator was indicted for fraud.
Controller of a company contacted clients and offered them deep discounts if they would pay him their invoices in cash. He then applied only a small percentage of what he received to the client’s account. The perpetrator would also spread the money around to other clients’ accounts so it appeared that many clients were slowly paying down their debts. By the time the company realized what was happening over one million dollars was embezzled and the FBI was contacted.
A midsized software company purchased developer and distribution licenses for certain computer code and used that code in one of their products. An employee of the insured software company determined (incorrectly) that the company no longer used the software in its products and terminated the license. Subsequently, the insured was sued for copyright infringement.
A healthcare consulting company was sued alleging that software developed by the insured technology company malfunctioned and resulted in errors in submitting claims to insurance companies for reimbursement.
A particular state department of labor advises a company that it may commence a lawsuit against it for the funds that it allegedly lost from its 401(k) Plan. The company reportedly transferred the funds from a 401(k) plan managed by one company to another.
The plan fiduciaries for a 401(k) Plan received a letter from DOL advising them that after an extensive investigation it appears that they have violated several provisions of ERISA. The DOL alleges the plan fiduciaries: did not forward amounts withheld from employees on a timely basis; improperly allowed the plan to make loans to shareholder-employees; make delinquent employer contributions to the plan; failed to make timely distributions to terminated employees; and filed Annual 5500 Reports which falsely indicated that the plan was funded in accordance with the minimum funding requirements of ERISA.
PRODUCTS LIABILITY AND RECALL
The car giant Toyota was forced to recall 8.1 million vehicles due to the potential for gas pedals to get stuck in floor mats and cause unintended acceleration as well as other concerns. The defect is believed to have caused 89 deaths over the past decade.
Peanut Corp. of America was an obscure peanut processor in Georgia that supplied to major brands such as Kellog’s and ConAgra. The massive salmonella outbreak at their facility, which ended up contaminating thousands of products containing their peanuts, killed nine people and sickened hundreds. More than 3,913 different products from roughly 361 different companies had to be recalled and the outbreak caused consumers to shun peanut butter, driving down industry-wide sales by 25%.