The Case of the “Crazed Contractor”

The social work profession is a noble one founded on service, integrity, and clinical expertise. At times, it can be a stressful and hazardous occupation. The nation is grateful for what you do, AND SO ARE WE! Thank you!

Do you employ a contractor in your practice? Do you ever intend to hire a contractor in your practice? If the answer is yes to either question, you better read on.

The following is an actual lawsuit that recently occurred and was a claim against a Professional Liability Insurance policyholder of the Preferra Insurance Company RRG, that was defended and adjudicated. First and foremost, you must be aware that many insurance carriers exclude legal defense and claims coverage for these types of lawsuits, but the Preferra Insurance Company RRG, covers these claims and lawsuits. Second, notwithstanding vicarious liability state provisions that may shield a defendant employer, there are routes available to drag the employer into the lawsuit depending on the facts and circumstances of the case. This case is one such case.

Unlike most other insurance carriers, the Preferra Insurance Company RRG paid the legal defense fees equal to $108,672 and paid the settlement indemnity damages equal to $100,000. The matter was closed in April 2020.

Here is the fact pattern of the crazed contractor case.

1. In September 2016, in the state of Georgia, a behavioral therapist and independent contractor, Mr. (“C”), working for Agency (“A”), molested A’s client, a minor, assigned to C for therapy. Agency A is co-owned by a licensed clinical social worker and a master’s degree holder in Social Work who has not yet passed her licensing exam.
2. The client’s mother (“M”) filed a lawsuit two years later, in September 2018, against both A and C. Based on a vicarious liability claim against A as the employer of the contractor C with claims including negligence, negligent hiring, negligent retention, negligent supervision of C, negligent care of a minor, negligent training, negligent failure to intervene, and negligent failure to warn.
3. Plaintiff sought compensatory damages for emotional and physical injuries, medical expenses, pain and suffering, punitive damages, and attorney’s fees and costs.
4. A, as the Agency employing contractor C, discharged its duty regarding hiring C to wit:

• A procured a background check of C, including state and federal criminal history, which found no criminal history and no evidence of inappropriate history. Authorities later verified C’s record as clean.
• A required a writing sample from C, C satisfactorily answered a questionnaire, C completed an interview, and C submitted his academic transcripts to A, which were deemed acceptable.
• C completed all state-mandated training and signed a Statement of Understanding and Compliance with A’s Code of Conduct.
• A required C to attend supervision and training meetings twice per month and review C’s patient sessions’ therapy reports.
• No one brought anything out of the ordinary to A’s attention during C’s tenure, and C had a good reputation among C’s client families.
• MAKE SURE THAT YOU PROMPTLY STAY UP TO DATE WITH YOUR EMPLOYEE AND CONTRACTOR THERAPY DOCUMENTATION. The fundamental fact is that there were two incidents of molestation by C on the minor client: (i) early in September 2016 and (ii) on September 20, 2016. C failed to submit his therapy reports to A regarding these sessions until September 23, 2016, which opened the door for the plaintiff to claim negligence and void the vicarious liability defense.
• An immediately suspended C had C come to A’s office for an interview and had C submit all completed reporting documentation but after the fact.
• A sent letters to all of C’s clients to notify them of C’s arrest. No one else came forward with allegations against C.
• Arrested on September 26, 2016, C pleaded guilty, in 2017, to criminal charges of Sexual Assault by a Psychotherapist Engaged in Sexual Contact with an Individual Being Treated/Counseled and Child Molestation. C is serving a 15-year prison sentence. These facts significantly bolstered the plaintiff’s lawsuit.

Ordinarily, in an employer-friendly state, together with the fact that A was not aware of C’s behavior, the case would not have advanced to trial. However, not all states are employer-friendly when you need comprehensive insurance liability coverage. Also, you need coverage that does not have sub-limits or exclusions for these matters.

Georgia law is a relatively employer-friendly state in finding sexual misconduct outside the course and scope of employment. It will insulate the employer from liability for the employee’s criminal activities, and several cases support this, including a Georgia Supreme Court case. All evidence showed that A had no prior knowledge, and C received appropriate ongoing supervision.

However, in this case, several issues swayed the defense’s strategy as follows:

1. There is blame in the lateness and timing of the therapy documentation reporting between C and A, which opens up a negligence claim;
2. The judge assigned to this case had significant experience as a plaintiff counsel in personal injury cases;
3. The judge had a record of awarding unusually high verdicts;
4. The verdict, in this case, could exceed $1,250,000;
5. Juries are unpredictable, and in this pro-plaintiff venue with a case involving inflammatory sexual abuse and molestation of a minor, the damages would be highly significant; and
6. Both the mother of the minor client and A’s co-owners were willing to settle the lawsuit. The mother wanted to avoid her son, the client, from the pain of testifying and depositions because of the personal details involved with the sexual abuse.

Accordingly, all parties agreed to the $100,000 cash settlement which the Preferra Insurance Company RRG, paid to the mother, along with the legal fees and costs equal to $108,672.

It is critical to point out that except for the Preferra Insurance Company RRG, most, if not all, Professional Liability Insurance carriers exclude or severely cap the coverage limit for this type of incident. Some insurance carriers have a $35,000 limit, and the coverage terminates the instant of any identified criminal activity. So, check your Professional Liability policy thoroughly to verify your exposure. If this social work agency “A” did not have a Professional Liability Policy with the Preferra Insurance Company RRG, the legal defense fees would have been over $200,000 along with the $100,000 indemnity settlement.

The final costs may have been much higher than $300,000 because the Preferra Insurance Company RRG, utilizes pre-negotiated legal fee rates with over 300 law firms across all 50 states through its partnership with Gallagher Bassett, the leading claims adjudication company in the nation.

There is no doubt that your profession is a noble profession with implicit values of service, integrity, and clinical competence. To continue with this effort, you must thoroughly read your liability insurance policies to assess the gaps that exist in your coverage.