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What Should You Do If Your Business Gets Sued?

When you take the right steps to protect your business, not only will you reduce financial risks but you will also gain peace of mind.

Most business owners are more concerned with sales, managing employees and maintaining cash flow than other aspects of their business. However, there are inevitable situations where you will be threatened with a lawsuit once in your life when running your business and it can be devastating. Without proper knowledge about legalities, litigation might seem to be stressful for you because of the ripple effect it creates on your financial health. So why do small businesses get sued?

There are two common reasons organizations face the threat of lawsuits:

Customers

Your customers can sue you for a number of reasons: either they fail to receive the service or products they were promised or they got injured on your business property. Even if you have a customer-friendly or transparent policy, the likelihood of getting sued is still high. People will bring charges against your small business for the following reasons:

  • Refusal of customer service claims
  • Personal injury on business premises
  • Discrimination

Employees

Although a lot of small business owners treat their employees fairly by forging a close and tight bond as it is one of the keys to a successful business, there are still unhappy employees who feel like they are not getting what they deserve. When they feel they are mistreated, suing the company is the way to alleviate the situation. According to a study conducted by Hiscox, one in every five small businesses gets sued and the fees associated with the legal processes can reach $125,000. If these cases go to trial, 25% lead to a court judgment causing companies to fork out a half million dollars or more.

Photo by Ashim D’Silva on Unsplash

Employees are tempted to sue if they feel they have been unfairly terminated or disciplined. These lawsuits are often a way for them to recoup any loss of income they suffered due to the action of their employer. Your business will also get sued if employees feel that you have not done your part to mitigate the situation. These are the common types of employee lawsuits:

  • Employee injury
  • Workplace discrimination
  • Wage and salary violations
  • Workplace harassment
  • Wrongful termination
  • Employee injury

What to do if you are faced with a lawsuit?

Talk to your lawyer right away

Once you find out that you got sued, contact your lawyer immediately before any formal action could be taken so you will be guided with the best course of action to take to lessen the gravity of the situation. Your attorney will help you to handle this legal matter properly to prevent worsening the damage. They will also give you insights how you should address the person if they threaten to sue, advising you not to contact the person directly. 

Collect all necessary information 

You will also need to prepare complete records about the entity or person threatening to file charges against you. The court will ask you to present pieces of evidence during proceedings. 

Contact your insurer

You will also need to talk to your insurer so you will know the correct process of filing a liability claim. 

Do not panic

Facing litigation can be nerve-racking but if you know that you are not guilty of committing any violation, you should continue to focus on running your business. Taking the right and lawful steps will protect your business from any financial risks associated with a lawsuit. 

How to reduce the threat of a lawsuit

Reduce financial repercussions

If litigation becomes unavoidable, minimize financial perils by incorporating your business in a way that protects your personal finances from any claims. You can do this by securing business insurance coverage that protects your finances. General liability insurance is also important because it covers a wide range of potential claims. 

Be mindful of what you say and do to both your employees and customers

You can be in trouble because of over-promising or making exaggerated claims about your capabilities and your business. Steer clear of saying anything whether privately or publicly that can haunt you for the rest of your life. Avoid making claims about your products or services that can be disputed in the future. 

Seek competent legal help

If ever you are into a situation where your customers or employees have put you in legal hot water, you need an informed and reputable lawyer to counsel you. If legal troubles arise, you should reach out to this person to avoid the possibility of a full-blown lawsuit.

The Bottom Line

When you take the right steps to protect your business, not only will you reduce financial risks but you will also gain peace of mind. Know your rights as a business owner so you can save your business from serious legal matters. 

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