Legal Definitions - error-of-judgment rule

The error-of-judgment rule is a legal principle that protects professionals from being held liable for an unfavorable outcome when they have made a difficult decision or given advice in good faith, based on their honest professional judgment, and within an area where there isn't a single, clear-cut answer or established best practice. It acknowledges that professionals, even highly skilled ones, are not infallible and sometimes must make complex judgments in uncertain or evolving situations. This rule applies when the professional has acted diligently and with reasonable care, but their judgment, in hindsight, turns out to be incorrect.

Here are some examples to illustrate this concept:

• Imagine a financial advisor recommending a specific investment portfolio to a client, believing it to be the most suitable strategy given the client's financial goals, risk tolerance, and the prevailing market conditions. The advisor conducts thorough research, analyzes various economic indicators, and consults with industry experts. However, due to an unforeseen global economic event, the market experiences a significant downturn, and the client's investments perform poorly. If the advisor's initial recommendation was made in good faith, based on sound professional judgment and within the accepted standards of financial planning at the time, they might be protected by the error-of-judgment rule. This is because the decision involved complex predictions about an inherently uncertain future (the market), and their judgment, though ultimately leading to a poor outcome, was not negligent but rather an honest mistake in assessing an unsettled area.

• Consider a physician treating a patient with a rare and complex set of symptoms that could indicate several different conditions. After conducting all standard diagnostic tests, consulting with specialists, and carefully reviewing the patient's medical history, the physician makes a diagnosis and prescribes a course of treatment based on their best medical judgment. Later, it is discovered that the patient actually had a different, equally rare condition, and the initial treatment was not effective. If the physician followed all appropriate diagnostic protocols, acted with reasonable care, and made a good-faith judgment call in a medically ambiguous situation, the error-of-judgment rule could apply. The physician made a difficult diagnostic decision in an "unsettled area" of medical knowledge (a rare, ambiguous case), not a clear failure to meet the standard of care.

• An architect is designing a cutting-edge building that incorporates a novel structural material for which long-term performance data is still emerging. The architect consults with structural engineers, material scientists, and reviews all available research, making a professional judgment that the material is suitable for the intended application, given its known properties and safety factors. Several years after construction, an unforeseen issue arises with the material due to a previously unknown long-term degradation process. If the architect's decision to use the material was based on diligent research, good faith, and the best professional judgment available at the time, rather than a disregard for known risks or established building codes, the error-of-judgment rule might protect them. The decision involved making a judgment call in an "unsettled area" where the full implications of a new technology were not yet completely understood.