A single large liability claim can wipe out a small business and irretrievably damage a brand built up over the years. Small businesses face a variety of claims. These are based on the nature, size and location of business operations.
Don’t be scared, but nearly $100 billion worth of lawsuits are filed against small businesses every year in this country. The nature of your business determines the most likely type of litigation. Are you at risk?
Is your small business at risk?
A small business employs less than 500 people. The Office of Advocacy of US Small Business Administration (SBA) reported 30.7 million small businesses in the US at last year’s count. Of course, the pandemic has messed with this number. But, it is the following percentage that matters most. This figure represents almost all businesses in the country. Small businesses like yours together create 1.5 million jobs annually and are major drivers of economic growth. (We are all praying that the economy recovers soon.)
However, 75% of small business owners are concerned about being the target of frivolous or unfair lawsuits. They pay out nearly $20 million from their own pockets in tort liability costs. In our litigious society, nearly 52% of all civil lawsuits target small businesses every year.
Typical Liability Claims
As I said, don’t let these numbers scare you! The way out is to ensure that you have the right kind of coverage against property damage claims and liability claims. Protect yourself and your business against the high cost of meeting a claim.
In general, claims are of three main types They are filed by another business, a customer, or an employee.
Commonly filed claims include:
- Breach of contract
- Slip and fall accidents
- Auto accidents
- Premises liability
- Discrimination on various grounds (against employees and/or customers)
- Employee injury/illness
- Intellectual property rights
A large part of lawsuits are filed by unhappy clients. Theft, damage by weather events and reputational harm are other areas where you could sustain losses.
Beating a Liability Claim
A property damage claim or liability claim has the potential to disrupt business, damage your reputation and even shut down your enterprise for good. It’s important to develop a robust strategy to handle business liability claims.
- Understand and analyze your risks: Some businesses, especially those related to the construction industry, are inherently more hazardous than others. For instance, a roofing business would have to invest in higher Workers’ Compensation coverage than a carpet cleaning business.
- Incorporate: Forming an LLC helps to limit your liability. This keeps your personal assets safe in the event of a large claim. Your personal and business finances remain separate when you incorporate your business.
- Maintain accurate records: Ensure that you keep meticulous records of every contract you sign, all communication with the customer, meetings, the services agreed upon, time, and date and place.
- Get the right insurance coverage: Invest time, effort and money in getting the right coverage. It’s wiser to be over- rather than under-insured. Research the types of policies and coverage available to a business like yours. A reliable, reputed and well-established insurance company or broker can give you the right advice and assistance.
For more information, contact Farmer Brown Insurance at (888) 973-0016. We have been assisting small companies stay in business for over 20 years. We would love to help you too. Give us a call.