It’s a reasonable expectation: you’ve done good work, now you expect to be paid for it. Most professionals have been told that suing a client to collect unpaid fees often results in a counter-suit alleging malpractice. So before suing their client to collect nearly $200K in unpaid fees, our Insured accounting firm waited for the malpractice statute of limitations (SOL) to expire, but then received an unexpected result.
In response to the unpaid fee claim, the Insured’s client (the Claimant) filed a counter-claim alleging errors were made in the performance of professional services. Putting aside whether these allegations had any merit, the Court held that the Claimant could not affirmatively collect on a judgment against the Insured relative to the untimely counter-claim, but could obtain an offset against any judgment rendered against Claimant with regard to the Insured’s unpaid fee claim.
Ultimately, the counter-claim significantly reduced the amount of fees the Insured was able to recover, plus the Insured’s deductible was triggered by the litigation.
Avoid allowing unpaid fees to accumulate – trying to collect them later doesn’t usually end well. Based on the amount you’re trying to collect, consider using an outside collection firm or writing off the bad debt. And lastly, if you are considering pursuing an unpaid fee claim against a client, review the applicable statute of limitations in your state and evaluate any corresponding rules that would govern a counterclaim for malpractice.
John Torvi is the Vice President of Marketing & Sales at the Herbert H. Landy Insurance Agency of Needham, MA. John has been in the insurance industry, focusing on the needs of business owners, for over 27 years. He holds a Bachelors Degree from Providence College and a Masters Degree from Springfield College and is a frequent speaker and contributor to professional journals and conferences for the legal, accounting, real estate and insurance industries.
The Landy Agency is a national leader in providing non-medical, professional liability and cybercrime insurance for accountants, attorneys, and real estate professionals. John can be reached at 781‐292‐5417 or johnt@landy.com. Visit www.landy.com for more information.
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