What Lawsuits Cost Small Businesses

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on July 18, 2014 in Disputes

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What will $105 billion get you? For some, it equals the gross domestic product of a small island nation in the Caribbean. However, here in the United States, it’s the burden that small businesses shoulder in tort liability costs.

As reported on Small Business Trends, a recent study by the U.S. Chamber Institute for Legal Reform showed that small businesses paid $105.4 billion in 2008 — and litigation liability costs are expected to continue to rise. What’s more, these figures don’t take into account the amount that small businesses have paid in connection with breach-of-contract lawsuits.

With the economy in its current condition, it’s clear that small businesses can ill afford to become embroiled in litigation. It’s a scenario where “the only way to win is not to play.” Here are several steps small businesses can take to provide added protection in the event they hear those fateful words: “You’ve been served”:

  1. Make sure you have adequate insurance for the nature and size of your business. Trying to self-fund a lawsuit, much less a judgment or award, is a surefire recipe for madness. Speak to an insurance broker to make sure you have the right policies in place and the right coverage amounts to protect you.
  2. Have written agreements with all your clients and vendors. In particular, you may want to include a provision that entitles you to get your attorney fees paid if you have to bring the matter to court (and you win). Note, though, that these kinds of terms are often mutual, so speak to an attorney about whether they’re a risk you can handle.
  3. Take preventive measures. Look at your facilities carefully to see whether they are accident-prone. And keep in close contact with your clients and vendors to ensure that any possible misunderstandings or miscommunications don’t escalate.

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