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Posts Tagged ‘CPA’

It is Time to Clean House – The Client Break-Up

Posted on: May 8th, 2019

By: Nancy Reimer

The end of tax season is an opportune time for certified public accounting firms to review their client roster to ensure existing clients are a good fit with the firm’s mission and culture. CPA’s are taught to exercise due diligence when accepting new clients. For example, a firm will  assess whether it has the required knowledge and skill to perform the work, whether the client’s expectations are reasonable, does its management team exhibit integrity and trustworthiness, had the client changed CPA’s often, is it negotiating down the fee, hesitant to pay a retainer, is the client delinquent in filing or does the client keep its records in poor condition? If satisfied with the answers, a firm will accept the client.

Once clients are in the door, however, should they stay? Is it difficult to get information timely from the client, does the client haggle over fees, fail to pay, act abusive towards staff, fake or inflate numbers to avoid tax payments or penalties, lack proper internal control or consistently fail to follow advice?

What about changes in the firm that may make servicing the client difficult? New technologies may make it difficult for certain clients to keep up, some clients may not be comfortable with online organizers and electronic engagement letters. Perhaps there is a staff-turnover losing technical expertise to perform certain services; or the cost of offering a service may outweigh the revenue generated by the service.

Firms should meet on an annual basis to review the direction of the practice and the client roster. It should determine how many clients it can comfortably serve, what services it performs best or at the highest rate of profit and the profile its ideal clients.  Problem or “toxic” clients should be terminated.

Once a firm has determined which clients it needs to terminate, it should devise a strategic plan for doing so. It is always a good practice to notify the firm’s insurer and liability carrier of its intent to terminate clients. Liability insurers may want to be informed of potential claims if a disgruntled client is terminated. Insurer’s loss prevention teams are experienced in terminating clients and may offer advice as to how to disengage a “problem” or “toxic” client.

Best practices dictate a disengagement letter sent by certified mail, return receipt requested is the best way to terminate a client. If, however, the client has formed a close personal relationship with a member of the firm then a face to face meeting may be warranted. Then a follow-up letter documenting the meeting should be sent.

Prior to notification, the firm should ensure all required documents are copied or scanned, all documents and authorizations are signed, all fees are paid (if possible) and all client documents are packaged and available for pick-up. Also, prepare the transfer authorization letter ahead of time for the client’s signature so the file can immediately be transferred to the successor CPA.

The disengagement letter need not identify any specific reason for the termination. Ideally, there are no impending, or tax filing, deadlines. If there are the firm should list those deadlines and what needs to be done to comply with the deadline. It is also a good idea to list all of the services the firm had performed for the client. If any projects are in progress, identify the stage of the project and what is necessary for completion.  The disengagement letter should identify the client’s responsibilities moving forward and issues to be addressed with the successor CPA. Finally, the firm should state it will assist in transferring the files to the successor CPA in accordance with the firm’s professional obligations.

If you have any questions or would like more information, please contact Nancy Reimer at [email protected].

Insurance Company Adjuster May Be Liable for Bad Faith

Posted on: May 14th, 2018

By: Joyce Mocek

Recently a Washington Court of Appeals held that an insurance adjuster, employed by an insurance company, could be held personally liable for bad faith and violation of the Washington Consumer Protection Act (CPA) in the context of adjustment of a claim. (Keodalah et al. v. Allstate Ins. Co., et al., No. 75731-8-I (Wash. Ct. App. Mar. 26, 2018).

In this case, an insured sought uninsured/underinsured motorist benefits under its auto policy with Allstate.  Allstate’s claim adjuster determined that the insured was 70% at fault.  The insured argued the accident was due 100% to the uninsured motorist, not him.  However, Allstate refused to change its position that its insured was 70% responsible for the accident-offering the insured only $5,000.  At the trial a jury determined the insured was not responsible for the accident, and awarded the insured $108,868.

The insured then filed a second lawsuit against the insurance adjuster and its insurer for bad faith, claims under the Insurance Fair Conduct Act and the CPA.  The trial court granted the defendants’ motion to dismiss, and the insured appealed.  The appellate court held that the adjuster was engaged in the business of insurance and acting as an Allstate representative had a duty to act in good faith, and could be sued for bad faith individually.  On the CPA issue, the Court rejected prior decisions that had held there must be a contractual relationship to be liable under the CPA.  Thus, the Court determined the insured could sue the adjuster individually for bad faith and CPA violations.

This decision may have far reaching implications as it opens the door for insureds to sue the insurance adjuster handling their claim, and/or any claims personnel, including supervisors, experts, or consultants.  Claims personnel may also be joined to defeat diversity.  There is also the potential for conflict between the claims professionals and their employer that may further complicate issues.   This case emphasizes the need to act in good faith, and engage in careful consideration of all issues involved in the claims process, and consider seeking legal counsel if any potential issues arise.

If you have any questions or would like more information please contact Joyce Mocek at [email protected].