Professional Negligence Law Reporter

An Indiana appellate court held that a one-year statute of limitations applies to a client’s claims alleging that an accounting firm had mishandled corporate tax returns.

From 2013 to 2017, L.M. Henderson and Co. prepared corporate tax returns for Residential Warranty Services, Inc. In 2019, Residential Warranty learned that its corporate returns were filed on a cash basis of accounting, which resulted in a significantly higher federal and state tax liability. In 2021, Residential Warranty sued the accounting firm. The defendant moved for judgment on the pleadings, arguing that the plaintiff’s claims were time-barred under the applicable one-year limitations period. The trial court granted the motion.

Affirming, the appellate court noted that under the Indiana Accountancy Act, Ind. Code §25-2.1-15-2, negligence or breach of contract actions against accountants must be commenced one year from the date the alleged act or omission is discovered or three years after services were performed, whichever is earlier. Here, the plaintiff became aware of the alleged negligence in September 2019 but did not file a complaint until August 2021. Although the plaintiff characterizes its claims as negligent misrepresentation or breach of fiduciary duty, the court said, the substance of the claims sounds in negligence and the lawsuit is therefore governed by the Accountancy Act. Accordingly, the plaintiff’s claims are barred by the one-year limitations period, and the trial court’s decision was proper, the court held.

Citation: Residential Warranty Servs., Inc. v. L.M. Henderson & Co., 196 N.E.3d 711 (Ind. Ct. App. 2022).