Exculpation Ruling Shows Danger Of Overbroad Clauses

By Kenneth Rosen (January 13, 2022, 5:25 PM EST) -- It is common that accountants seek to limit their liability to a client in the event of malpractice. Typically, in the retention agreement, the liability is limited to the amount of fees paid by the client to the accounting firm.

It also is increasingly common that professional malpractice claims, as well as officer and director liability claims, are principal sources of recovery for out-of-the-money creditors in a Chapter 11 case.

A post-confirmation litigation or liquidation trustee is often appointed to investigate the merits of a malpractice claim against the debtor's accountant.

The first response by the accounting firm will be a reference...

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