The phrase “I’ll see you in court” is fast becoming the biggest threat to small business in America. With little in the way of protection, many small businesses will – in their lifetime – have to succumb to the unrepentant burdens of being sued. The truth is, the fall from being served to closing up shop is quick yet painful.
Today, it’s no longer a matter of if you’ll get sued, it’s a matter of when. The numbers don’t lie and they paint a clear picture – small businesses are an easy target for the disgruntled and the bereaved. Currently they make up 81% of all tort claims in America. Although these numbers are quite high, many small businesses haven’t taken the necessary precautions and therefore won’t make it past the first three years after they’ve been sued. Those that do, will have to drastically change their business strategy in order to survive. Changes that could make doing business fraught with difficulties.
Recent industry statistics suggest that every year approximately 56% of small businesses will get served. What’s even more alarming, is that close to 90% of such businesses will get sued during their lifetime.
Here are some precautions that can be taken in order to mitigate litigation risks:
Get Your Contracts In Order: Your first line of defense when you’re being sued is the contracts you have with your employees, vendors and contractors. Proper documentation requires the use of a qualified lawyer as a standardized template won’t cover the unique aspects of your business.
Ensure Your Personal Liability Is Intact: Something as small as signing a contract in a personal capacity instead of as an employee of the business can immediately dissolve any limitations regarding your personal liability. For this reason, you need to create a clear demarcation between your business and yourself as an individual.
Protect Your Intellectual Property: In this case you would be the one seeking damages. To give yourself actual grounds and to protect yourself from any any intellectual property theft have an intellectual property lawyer audit your business so you know what needs to be protected.
Train Your Staff: Plenty of accidents can be avoided if you and your staff are extra careful and precise in the work be carried out. Wherever possible – and especially if you’re in an at-risk industry – know what the correct procedures are and be sure your staff know as well. More importantly, follow the correct procedure at all times and make this a part of your company’s culture.
Obtain Commercial Liability Insurance: This is not a preventative measure, however, general commercial liability insurance does typically absolve the costs involved in litigation. You’ll be able to continue doing business as usual without being burdened by the excessive litigation expenses.
The True Cost Of Litigation
The cost of litigation for a small business ranges between $3,000 to $150,000. It may not be the hefty sum you imagined, but the true cost is one that isn’t as outright, one that you won’t detect on a balance sheet – the cost of your reputation. Your business is primarily built on your reputation. As your reputation erodes so will your finances. You’ll bleed clients until running a business is something you can no longer afford.
Commercial Liability Insurance As Protection
Commercial liability insurance is one important way to cover the cost of litigation in most instances. It covers everything from your bond to the investigation, the attorney’s fees, judgements, settlements and medical expenses.
There’s no real way to avoid being sued, you’ve seen the numbers – it’s inevitable. The only way to survive litigation when you are sued is to have general liability insurance, it’s a small cost for unsurpassed protection.
What every small business needs to realize is that it’s not about whether you can afford to have commercial liability insurance, the real question is whether you can afford not to have this insurance?