Protecting your business from a lawsuit may not always be top of mind when running your own business. Being sued as a business owner can be costly, stressful, and time-consuming. A lawsuit against your business could damage your reputation, or worse, put you out of business. The best way to protect yourself and your business from a lawsuit is by being proactive. Follow these tips to protect your business from a lawsuit.
All Agreements Should Be in Writing
Make sure all agreements and records are filed and stored in a safe place. Following phone conversations, send a follow-up email to confirm any key details. In the event you are sued, signed contracts and agreements are crucial in settling disputes. Formal contracts such as employment contracts, service contracts, website terms of agreement, etc., are necessary, but you’ll also want to keep a record of all business transactions. Be sure to check with your attorney on what contracts or agreements you need to have in place. Without solid legal documents for employees, independent contractors, or third parties, your business is at an increased risk of being sued.
Establish Clear Employment Practices
Any business that has employees needs an employment practices liability policy. Employment Practices Liability insurance provides employers with coverage for wrongful termination, discrimination, or sexual harassment of the insured’s current or former employees. In addition, coverage can sometimes be endorsed to cover independent contractors who file suit as well.
Employment-related suits have risen 400% in the past 20 years. Many of these suits filed are for wrongful termination. When employee lawsuits go to trial, the employee wins more than 65% of the time. The average cost to settle an employee lawsuit out of court is $75,000, and the average amount awarded to an employee in jury trials is $217,000. These suits are typically not covered under the General Liability Policy.
Having a People Risk Management (PRM) solution helps you save time and money while reducing risks associated with HR and compliance issues. In addition, it can save you legal fees that can be upwards of $350 per hour and thousands of dollars in fines and penalties. Mackoul Risk Solutions’ Employee Benefits division provides HR consulting services with access to live HR support, compliance documents, a handbook builder, and workplace harassment training.
Build a business that has strong foundational ethics and integrity to establish trust and respect. Every time you interact with an employee, client, or partner, be professional. Bending the rules and misrepresenting your business could come back to bite you in the form of distrust or a lawsuit.
Separate Personal and Business Finances
As a business owner, you can protect your personal assets by structuring your business as an LLC or corporation. Operating your business as a sole proprietor may be the easiest and most cost-effective option, but in the event of a lawsuit, you will be held responsible. To determine the best way to separate your personal and business finances, you should discuss your options with a legal advisor.
Protect Your Business with Sufficient Insurance
Having insurance won’t help you avoid getting sued but will protect your assets and minimize financial impact in the event of a lawsuit. Cyber Liability has become an increasingly important coverage as more businesses fall victim to cyber breaches. A data breach can happen at any time and affect any business. The effects of data breaches could be devastating. Not only will you be responsible for credit monitoring for anyone involved, but you’ll also have to investigate how the data breach occurred and outline steps to avoid another occurrence. This whole process can be costly and very time-consuming.
Although the type of insurance will depend on your business’s specific needs, there are several policies that are important to consider:
- Business Auto Insurance
- Commercial Property Insurance
- Cyber Liability Insurance
- Crime & Fidelity Bond Insurance
- Employment Practices Liability Insurance (EPLI)
- General Liability Insurance
- Directors and Officers Liability Insurance
- Errors and Omissions Liability Insurance (E&O)
- Workers Compensation and State Disability Insurance
- Commercial Umbrella Insurance
- Business Owners Policy
Contact us today to learn more about the specific coverages that can help protect your business from a lawsuit. Our experience can guide you through the challenges of doing business in an increasingly litigious society. We have the knowledge and resources to offer you comprehensive coverage at a competitive price.