Since the world is becoming increasingly litigious, this event does not really surprise me. However a very specific set of particulars apply to of this case, so I am not sure it can be extrapolated to flying instructing in general
That been said the prime directive for a flying instructor is to not let the student crash the airplane. However students can do some pretty crazy things. The only accident in my nearly 40 years of flying was caused by the student retracting the landing gear instead of the flaps on a touch and go. I was a half second too slow stopping them and getting the gear switch back to the gear down position. Unfortunately one of the 3 gear legs unlocked and folded and the aircraft was damaged enough to write it off. I was PIC and the instructor, so I own it and sure wish it had not happened, but it did......