Business Law

Preparing For A Business Lawsuit

It's smart to prepare your business for potential lawsuits down the road.

Shield Yourself from Personal Liability Exposure

Some lawyers advise that every business should be incorporated or formed as some other type of limited liability business entity. While incorporating is no guarantee against personal liability exposure, it's certainly an effective shield against the risks and dangers inherent in operating a business.


Having the right insurance in place is a must when trying to protect you and your business if you are sued.

An insurer has an obligation to defend you on claims where there is a potential for coverage under the policy. This means that, regardless of the outcome on a lawsuit, your insurance company may to hire and pay for a lawyer to represent your interests in the litigation.

If you're liable for a claim that's covered under a policy, an insurance company will also have an obligation to indemnify (cover) you against any judgments up to the policy limits.

Insurance coverage questions are very complex issues. To get more specifics on what type of business insurance you should have, call your agent. Also, read your policies and ask your agent to clarify any questions you have.

Policies and Procedures

To reduce the chances of getting sued, it also helps to have well-drafted policies and procedures in place. Every employer, for example, should consider having an employee handbook that outlines what is expected of employees in the workplace.

Continuing Education

It's extremely helpful to have employees who are well educated on issues relating to their work performance. This promotes safety in the workplace and helps your business to comply with the law.

Corporate Compliance Programs

Establish a corporate compliance program where management routinely reviews operations to ensure compliance with rules and regulations that govern the workplace (such as OSHA).

Even if your company ends up being liable on a claim, a compliance program will help to lessen potential liability exposure, since it's evidence of your efforts to do the right thing. For serious violations, it may even insulate management from criminal liability.

Get A Lawyer

Just like auto mechanics, lawyers are fond of saying, "Pay me now or pay me later."

You could end up being your own worst enemy if you're drafting your own contracts and doing business deals without legal advice. Well-drafted documents help to prevent lawsuits and, in the long run, save countless dollars that may otherwise be spend in defending a lawsuit.

You are also in a much better position to defend a lawsuit if you already have a continuing relationship with a lawyer or a law firm. Once you have been sued, the clock is running and you have only a short time in which to respond (usually 30 days or less). This is not the time when you want to have to go out and beat the streets to try to find a lawyer to represent you.

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