Prospects for Malpractice Suits in the Business Consulting Profession

Abstract

A widely noted trend in society has been to fix responsibility more rigorously upon the experts in a diversity of fields upon whom society in general has grown increasingly dependent. Physicians and attorneys were among the first professional groups to be held accountable at law for the standard of their services to the public. Today, a doctor who errs in surgery or a lawyer who mishandles a case in court is increasingly likely to be sued by his client for malpractice, a field of law which is governed by the doctrine of negligence. Whereas just 15 years ago only 5 percent of the country's lawyers carried malpractice insurance, today it is estimated that more than 95 percent are covered for professional liability.' Recently business and management consultants have begun to feel the same malpractice pressures. Consulting is a relatively recent but rapidly expanding field which today includes 19,733 consulting firms employing 288,603 people.2 The survey reported here is concerned with the increasing responsibility and accountability of individuals and firms which offer professional consulting services to business, government, and other organizations. Particular attention is given to professional liability claims which are pursued to litigation by the client and to the methods by which the professional consultant can protect himself and/or his firm from legal action stemming from alleged malpractice or errors and omissions. As this article will reveal, consultants are relatively unaware of the rapid increase in professional liability suits against those in their profession. Lumley, Dennant and Company, Inc., one of the few insurance companies which insures consultants, has reported that its claims rose 75 percent from 1971 to 1972 and that in 1971 the company paid out 27 percent of its premiums in claims. Three groups were surveyed: (1) individual consultants and consulting firms, (2) professional associations to which consultants belong, and (3) law firms specializing in commercial law. In total, 215 questionnaires were mailed out during November-December 1972. A questionnaire was designed for each group surveyed. One hundred and twenty questionnaires were sent to consulting firms, 70 to professional associations, and 25 to law firms. In January-February 1973 follow-up letters and additional questionnaires