Protecting Your Small Business from Negligence Claims

Three out of every four small businesses in the US face one or more insurable events every year, and almost 30 percent of these relate to client complaints and disputes. We are all fallible humans, and everyone makes mistakes from time to time. Suppose a mistake leads to a problem with the product or service delivered or to an incident resulting in injury or property damage. In that case, there is exposure to a negligence claim from a customer or third party.

Prevention is better than cure

Managing risk is a vital part of running any business. The likelihood of a negligence claim is drastically reduced when risk management procedures are in place. These include quality management, proper training, and adequate supervision.

None eliminate the possibility of something going wrong, but they make it less likely. Also, demonstrating that controls are in place can strengthen the defense of any claim if it goes to court or mediation.

Risk Management Practices

Several practices can reduce the potential for customer complaints and professional negligence claims. These include:

• Ensuring clear communications with customers throughout every stage of service delivery;

• Identifying weak points in processes and improving them;

• Thoroughly vetting employees before hiring and training adequately once on-boarded;

• Adhering to industry standards wherever applicable;

• Document all transactions as far as possible.

These practices help mitigate the risks posed by professional negligence claims, which is why it is so important to have an effective risk management system in place. Such a system should be reviewed regularly to remain relevant and current with customers’ changing needs and industry regulations. In addition, a system for recording customer complaints and grievances should be in place to address any issues promptly and amicably. By implementing good risk management practices, you can significantly reduce the potential for disputes with customers and lessen your chances of facing negligence claims.

Insurance is a safety net

More businesses than ever choose to carry professional indemnity insurance. That’s fine, but consider it a safety net against absolute disaster. Most policies have a high deductible, typically in five or six figures.

For anything less, you are on your own, although you might still need to report lower-value negligence claims to the insurer as they alter your overall risk profile as a business. You also need to act as a prudent uninsured – defending the claim staunchly and seeking the most cost-effective resolution as if no insurance existed.

Get legal advice early on

Understood, lawyers can be expensive. But it is important to at least have a lawyer on notice when you are notified of a claim. This might be a general business lawyer, a premises liability attorney, an HR law professional, or a similar profesisonal.

Even if you think you can handle the matter yourself, having a lawyer ready is a wise precaution, as things can go south quickly. Also note that if a matter proceeds to court, you can claim attorney/client privilege over certain documentation if it is channeled through a lawyer, meaning you are not obligated to share it with the claimant during pre-trial discovery.

Finally, look into other no-win no-fee legal service providers. These are becoming more available in the market and offer a much better risk/reward ratio when entering litigation. With such services, you incur no costs unless you win your case, and then they take a slice of your success instead. This makes them attractive to smaller businesses with limited resources who need access to justice but don’t have the financial might of larger corporations or organizations.

Nobody likes facing negligence claims, but understanding how risks arise and knowing what options are available can make it easier to deal with such events should they happen. Doing so can help reduce losses and maintain any vital competitive advantage that comes from having solid management processes in place.