Medical malpractice claims may be asserted against any healthcare provider, including counselors, as well as the practices that they own. The insured in this case was a licensed professional counselor (LPC) who owned a counseling practice offering a range of services, including marriage and family therapy. At the time of the incident, she had recently hired an unlicensed counselor to support an expanding client base. The unlicensed counselor (supervisee) had a master’s degree in counseling with a specialization in marriage and family therapy but had not yet passed the licensing exam after one attempt. The LPC hired him with the understanding that she would provide mentoring and supervision. Although the LPC had over a decade of counseling experience, she was new to both practice ownership and clinical supervision.
A few weeks after being hired, the LPC proposed an idea to the supervisee for a joint real estate venture to develop a nonprofit facility for adolescents in foster care. She explained that the property required substantial renovation and that they would need to raise capital for the project. The LPC noted that fundraising methods would be determined later. The supervisee agreed to the verbal arrangement, which included equal ownership, and a formal purchase of the property was completed. The LPC assumed responsibility for property management, while the supervisee was tasked with managing the finances.
Summary
The client, a 36-year-old married male, presented for counseling to address anxiety, depression, and post-traumatic stress stemming from childhood abuse. He reported ongoing family dysfunction involving his wife and two children, which he attributed to his underlying behavioral health conditions. The LPC assigned the case to the supervisee, who conducted an initial assessment during the first in-person session. Based on the assessment, the supervisee recommended a treatment plan incorporating both individual and family counseling. Although the client verbally agreed to the proposed plan, informed consent was not formally documented. The supervisee did not consult with the LPC regarding the treatment plan, operating under the assumption that the LPC would review session notes and provide feedback as needed. At the time of hire, the LPC did not establish a formal supervisory framework beyond indicating that she would review the supervisee’s clinical documentation. Due to the lack of direct ongoing supervision, the LPC was unaware of the supervisee’s clinical practices and interactions with clients.
The client engaged in twelve weekly individual sessions with the supervisee which were focused on managing anxiety and depression. His wife participated in six of these sessions in which the supervisee conducted role play to strengthen their conflict resolution skills. Over the subsequent month, the supervisee continued individual sessions with the client and initiated individual counseling sessions with the client’s two teenage sons to address stressors stemming from family dynamics. The client reported noticeable improvement in his symptoms as well as a significant reduction in family conflicts and stress.
During subsequent counseling sessions, the supervisee learned that the client and his wife were interested in supporting initiatives for adolescents in foster care. After this disclosure, the supervisee shared with the client that he was co-owner of a property intended to be developed into a behavioral health treatment center for at-risk foster youth. He also mentioned that the project required funding and said that they were seeking donations to bring the vision to life. The supervisee later testified that he did not solicit a donation, but that the client voluntarily offered to help. The client discussed the opportunity with his wife, and they decided to make a charitable contribution, believing the funds would be used to renovate the property and establish a nonprofit behavioral health treatment center for adolescents. At the following counseling session, the client presented a substantial donation to the supervisee, who accepted it based on a verbal agreement. The supervisee did not inform the LPC, assuming it was unnecessary since he was solely managing the property’s finances and there were multiple fundraising efforts and charitable donations in progress.
It is important to note that the client continued receiving counseling from the supervisee after the initiation of a business partnership (dual role). Several weeks after the monies were exchanged, the client expressed a desire to become more actively involved in project management, but his request was ignored by the supervisee. Tensions emerged when the client perceived a disconnect between his expectations for the project and its actual progress and subsequently requested the return of the donation. The supervisee informed the client that the funds could not be returned, as they had already been used as a deposit toward property renovations. The client responded by stating he would be retaining legal counsel, adding that the situation had intensified his anxiety and depression. In response, the supervisee abruptly terminated the client’s treatment. One month later, the client filed a lawsuit naming the supervisee, the LPC, and the counseling practice. It was only upon receiving the Summons and Complaint that the LPC became aware of both the donation and the client’s abrupt discharge from care. The LPC immediately terminated the supervisee via a text message and subsequently refused to accept his calls having no further communication with him.
Risk Management Comments
The client (plaintiff) asserted that the LPC failed to provide adequate supervision. He claimed that, had the LPC properly monitored the supervisee’s conduct, the boundary violations and resulting harm could have been prevented. The LPC was held vicariously liable for the supervisee’s actions, as his employer and owner of the counseling practice.
The plaintiff asserted the following:
- Failure to obtain informed consent for both individual and family counseling.
- Boundary violations, including the establishment of a dual relationship with the client.
- Negligent counseling practices.
- Improper termination of care.
The plaintiff’s expert testified that the supervisee violated the ACA ethical standards by soliciting a monetary donation from the plaintiff and that this boundary violation compromised the integrity of the therapeutic counseling relationship resulting in harm. The plaintiff testified that he felt pressured to donate and, when it became apparent that the supervisee was not honoring their verbal agreement, his anxiety and depression became unbearable. When asked about his current lack of treatment for anxiety and depression, the client explained that the abrupt termination of care led to a loss of trust in counselors, preventing him from continuing therapy. He explained that because of this, he lost his job and had to be admitted to a psychiatric hospital for suicidal ideation.
The supervisee acknowledged entering into a dual relationship with the client but attempted to mitigate his liability by denying that he solicited a donation. He testified that the client had voluntarily offered the funds and maintained that the incident had no impact on the client’s behavioral health condition. Initially, the LPC asserted that she was not at fault, emphasizing that she had never met the client and had not established a counselor-client relationship. However, defense experts did not support this position. They concluded that the LPC failed to uphold the standard of care required of supervisors, citing established professional guidelines—specifically Section F.1.a. of the ACA Code of Ethics, which requires supervising counselors to conduct regular individual meetings and ensure that supervisees adhere to ethical standards. The LPC later admitted to the defense team that her demanding schedule prevented her from fulfilling the obligations of her supervisory role.
As part of the litigation process, the client’s healthcare information records were analyzed by the defense experts who concluded that the documentation was incomplete and would not be helpful in supporting the defense of the case. Specifically, there were no counseling entries for any of the sessions with the client’s spouse and family members, and the records were unsigned and did not include documentation of informed consent. In addition, there was no documentation by the LPC to reflect supervision.
Resolution
A key factor in the defense’s resolution strategy was the acknowledgement that the defense experts were unable to support the treatment provided. The absence of adequate supervision, combined with the severity of the boundary violations and poor documentation practices, presented significant challenges for the defense and would be difficult to defend before a jury.
Total Incurred:
Based upon the above-referenced challenges and diminished potential for a successful defense verdict, a settlement was negotiated in mediation with a total incurred cost of over $550,000.
(Figures represent the payments made on behalf of the LPC and the supervisee as an employee of the practice.)
Risk Management Recommendations: Supervision
- Adhere to the roles and responsibilities of counseling supervision. Counseling supervisors must actively monitor client welfare, evaluate supervisee performance, and ensure that supervisees adhere to ethical and professional standards, as outlined by the American Counseling Association (ACA).
- Conduct informed consent with the supervisee. At the outset of the supervisory relationship, supervisors should engage in a thorough informed consent process. This includes discussing the roles, responsibilities, expectations, and structure of the supervision. The conversation should be clearly documented.
- Ensure that supervisees conduct informed consent with clients and document this discussion. This process should address client rights, privacy, confidentiality, and the nature of supervision, among other topics.
- Understand and inform supervisees about laws or regulations that govern client interactions, including but not limited to confidentiality and privacy laws and mandated reporting statutes. Ignorance of the law, employer policy or professional ethics does not absolve the counselor/supervisee of the responsibility to act within established clinical, ethical and regulatory guidelines.
- Conduct regular audits of client healthcare information records to ensure that supervisees document contemporaneously, factually and comprehensively. A comprehensive healthcare information record is the best legal defense.
- Document all supervisory sessions and client interactions. Supervisors should document all supervisory sessions and related client interactions in an objective and concise manner. Accurate and timely records are essential for ensuring continuity of care and serve as a critical component in defending against potential malpractice claims.
- Engage in continuing education and seek consultation with colleagues regarding supervision methods and techniques when assuming a new role of supervisor.
- Model cultural competence and how to work with diverse client populations.
- Deliver accurate, honest and timely feedback to supervisees regarding their performance. This feedback should include both positive reinforcement and constructive guidance to support professional development.
- Offer direct clinical support and guidance to assist supervisees with treatment planning, therapeutic interventions, and navigating ethical dilemmas as they arise.
- Evaluate supervisees’ understanding of the ethical requirements related to role transitions—such as shifting from individual to family counseling or from a therapeutic role to an evaluative one—as outlined in ACA Code of Ethics Sections F.1.c. and A.5.d.
- Establish and maintain professional boundaries at the outset and throughout the supervisory relationship. If a dual relationship is unavoidable, steps must be taken to minimize potential risks, in accordance with ACA Code of Ethics Section F.3.a.
- Follow the ACA Code of Ethics, section F.4.d., when terminating the supervisor-supervisee relationship--- discuss the reasons, provide a termination notice to the supervisee and recommend appropriate referrals to possible alternative supervisors.
Risk Management Recommendations: Individual Counselors and Business Owners
- Develop and implement thorough screening and hiring procedures for all counseling staff ensuring completion of multistate background checks and verification of all required documentation prior to employment.
- Know and practice within the counselor’s state-specific scope of practice, and in compliance with standard of care and state licensing/certifying board requirements. If more than one standard of care, law or regulation is involved, the counselor should adhere to the most stringent applicable standard.
- Develop and implement written policies to ensure consistency of operations and adherence to standards of care. Review and update policies annually to ensure that they are aligned with current practices.
- Provide ongoing education for all staff members regarding policies and procedures, including incident reporting, documentation and client emergencies, upon hire and ongoing thereafter.
- Ensure that appropriate job descriptions are in place, including supervisory expectations for all staff members.
- Ensure that all employed and contracted staff, including interns and supervisees follow the ACA Code of Ethics (A.12) when terminating the client-counselor relationship to avoid claims of abandonment and neglect.
- Avoid extending the counseling relationship beyond conventional boundaries. Counselors must exercise professional judgment in all client interactions. If boundary extensions are unavoidable, conduct informed consent for every proposed boundary extension, and document all discussions in accordance with the ACA Code of Ethics. (A.6.c.), including, but not limited to, the counselor’s rationale for the interaction and the potential benefits and risks for the client.
References
Disclaimer
The information, examples and suggestions presented in this material have been developed from sources believed to be reliable as of the date they are cited, but they should not be construed as legal or other professional advice. CNA, Aon, Affinity Insurance Services, Inc., NSO, or HPSO accepts no responsibility for the accuracy or completeness of this material and recommends the consultation with competent legal counsel and/or other professional advisors before applying this material in any particular factual situations. This material is for illustrative purposes and is not intended to constitute a contract. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. Certain coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds. The claims examples are hypothetical situations based on actual matters. Settlement amounts are approximations. Certain facts and identifying characteristics were changed to protect confidentiality and privacy. Any references to non-CNA, non-Aon, AIS, NSO, and HPSO websites are provided solely for convenience, and CNA, Aon, AIS, NSO and HPSO disclaim any responsibility with respect to such websites. “CNA” is a registered trademark of CNA Financial Corporation. Certain CNA Financial Corporation subsidiaries use the “CNA” trademark in connection with insurance underwriting and claims activities. This material is not for further distribution without the express consent of CNA. Copyright © 2025 CNA. All rights reserved.
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