Errors with E&O – Part 3

KMRD Are You Ready for One Minute From Normal?

The Holmdel Fabric Company, like Ford, Hewlett Packard and Apple, was launched in a garage. Through hard work and intelligence, the founder built the firm into an enterprise employing more than 100 workers.

Holmdel held many patents, including one for a fabric which changed color with a person’s body temperature. An entrepreneur saw an opportunity to create a line of lingerie that “changes color with your mood,” and placed an order for a large quantity of this fabric.

To anticipate competitors who would quickly produce knock-offs, the entrepreneur jumped in with both feet. He hired a marketing company to create advertisements, a website and social media campaign. Supported by some quick research, the entrepreneur named both his company and line of apparel “What’s your Mood? Inc.” Stitching machinery was retooled and sales representatives took orders from retailers and one of the home shopping channels.

Product launch, which was scheduled for Valentine’s Day, was preceded by a two hour “sale” on the shopping channel in early January. There was only one problem; the fabric didn’t change color. Because the presenter was under the hot lights of the soundstage, she perspired. The combination of wet fabric with cool air conditioning negated the catalytic effect and desired color change.

As a result, the home shopping channel canceled future sales taking a financial loss.. Retailers also canceled their orders, claiming the product would not sell after having been discredited on television. They also suffered economic loss.  On Valentine’s Day, the Holmdel Fabric Company’s mood was ruined by news it was being sued by What’s Your Mood? Inc. The firm failed in its professional duties to their third party clients causing them to suffer a financial loss, the genesis of most professional claims.

To learn more about your own firm’s professional liability risk, and to discuss how E&O insurance may be able protect it one minute from normal, please contact your relationship manager at KMRD Partners. They can provide advice regarding your firm’s situation regarding this critical issue.

Errors with E&O – Part 4

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