STAY OUT OF COURT: AVOIDING THE LAWSUIT
October 30, 2014
BY JAMES FORREST
We talk about a broad range of topics in this space, designed primarily to educate our readers on the ever-changing legal landscape. Well, some things never really change. One of those eternal truths is that it’s never good to get sued, and you really want to stay out of court when you’re a small business.
While there is no true average cost of defending your company in court against a lawsuit, since the range of types of suits varies so much (employment matters, contract breaches, warranty complaints, workplace injuries, etc.), let’s just say that it gets pretty ugly, pretty fast—reaching five figure sums with speed. Most small businesses don’t have that kind of cash lying around, and even if they do, they have it earmarked for much better dreams.
So what are the keys to staying out of court? First, as we have said many times in this space, having proper risk management strategies in place, including a set of contract templates, is paramount. Contracts should offer clear guidance for all of your dealings, both internally with employees and externally with contractors, vendors, and customers. Also, working with commercial insurance professionals can properly protect your business from multiple perspectives (real estate, vehicles, and worker’s compensation, as just a few examples). An umbrella policy is also generally a good idea.
Minimizing risk is also about daily processes and procedures. These can be as simple as safety protocols on an assembly line, drug testing delivery drivers, or governing the company’s fair hiring practices.
Finally, staying out of court—avoiding the lawsuit—can often be about your orientation towards customer service. No one likes to be slighted, but the ability to overlook a wrongdoing by a vendor or customer may sometimes be the right play. It’s almost always better to negotiate rather than to go into full blown litigation. You can not only keep the legal fees down, but you also keep your fate in your own hands.
In conclusion, stay mindful of using contracts in all of your dealings, being proactive in your risk management strategies, policies, and procedures on a daily basis, and when your business dealings do get heated, remember to stay calm and focus on the big pictures. In all of these areas, having the right planning in place with your corporate attorney, commercial insurance agent, and senior executives can pay meaningful dividends.