Protecting Your Business Against Lawsuits

by Frankie Wallace, Guest Contributor

It only takes one lawsuit to ruin a business people have worked so hard to create. Whether that’s because the business loses the lawsuit and has its reputation and finances shattered or the legal fees just run a company dry of funding, a lawsuit can have earth-shattering consequences.

There are things you do not have control over — for instance, people’s negative reactions to good work, or when employees or business partners conduct themselves unprofessionally unbeknownst to you. The only thing you have control over is your reactions to these happenings, and handling them wrong could result in more trouble for you.

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It would be nice to think that running your business respectfully to the best of your ability would be enough to fend off any problems brought against you. Realistically, however, that’s just not how it is. The fact is, people may have problems with you whether or not you deserve it, and unfortunately sometimes they sue. For this reason, it’s important to be on your toes. This means identifying potential threats, taking preventative measures, and having a potential game plan if you end up on the receiving end of a lawsuit.

Identifying Potential Threats
Handling lawsuits will be a lot easier if you approach it from the angle of identifying threats early on. You can be aware of potential situations before they happen, so you don’t get blindsided with anything. However, this requires you to be sharp. It requires a sense of constant awareness not only within your operations but within your industry.

Because industries are always changing, some liability issues may come up that entrepreneurs didn’t anticipate in the past. Some common reasons behind suing a business include:

• Breaching of legal contracts
• Health endangerment
• Physical and mental abuse
• Sexual harassment and abuse
• Malpractice
• Copyright infringement

These things come more commonly and unexpected than you may think. For instance, if you’re a builder or a landlord, you probably know about the dangers of asbestos exposure now, but this was not always the case. Some people have experienced lung disease from asbestos and taken previous landlords to court due to poisoning.

In addition to keeping your ear to the ground industry-wise, it’s wise to do the same with your newest employees. You would hate to be the employer that gets caught in a sketchy situation because a new intern plagiarized their work or stole something in order to get their job done in a timely manner. It’s always best to nip things like that in the bud before they become monster-sized issues and get taken to court.

Preventative Measures
When you’re aware of a lawsuit threat, you can be proactive and take measures toward preventing it. However, mustering up the money, work, and time it takes for something like this can be an endeavor of its own. It’s totally worth it, however, rather than to take the chance and get slammed later.

This starts with ensuring your operations are running smoothly and honestly. Employees need to be trained properly and made aware of how important the stipulations around their operations are. Their supervisors should be paying attention to their work in order to stop any misconduct from taking place. And don’t forget network and building security to protect products and private information. The show must go on, after all.

Beyond the basic, common-sense stuff, though, some further professional action should be taken. For instance, most experts would say that it’s vital to have liability insurance in case of a lawsuit. While it doesn’t cover everything (for instance, punitive damages resulting from a lawsuit), it does cover litigation lawsuits, which is still worth the expense. Additionally, having every agreement in writing and being very careful with your business will make someone think twice before taking action against you. It couldn’t hurt to get customer feedback when you can so any issues can be resolved in a timely manner before they get to court. Oh, and having a good lawyer on deck is always handy.

Taking Action in the Case of a Lawsuit
Even the best preventative measures don’t stop a lawsuit sometimes, so let’s say you do end up getting sued. Somebody shows up to your place of business and serves you. What are you supposed to do?

Well, if you have the insurance we talked about earlier, meeting with an agent to see what they can do is good. Insurance companies often have their own lawyers as well, so you may not have to pay a lawyer fee. Hopefully it’s a simple matter of litigation and they can settle quickly. It’s not always that simple, though.

If you do happen to find yourself in a lawsuit, it’s important to have a good lawyer on hand. Do not communicate directly with the plaintiff — any interaction you have with them could be used against you in a court of law. But make sure you keep good records and are able to pull from them in any case. Having money saved for such a matter will be necessary as well — good reserves will make the financial damage less substantial, even in the case that you win.

Have you been sued? What further advice would you give? We’d love to hear more about it — please let us know in the comments below!

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