Getting Sued is Expensive—Even When You’re Right

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Getting Sued is Expensive—Even When You’re Right on avanteinsurance.com

Lawsuits cost small businesses more than $105 billion each year

We’ve all heard of malpractice and know what it means. And for the most part, we associate that term with wrongdoings or major mistakes committed by healthcare professionals. But did you know that pretty much anyone who’s providing a professional service can be accused of and sued for malpractice?

The fact is, if you own a small business or if you’re a freelancer and you make a mistake or fail to provide the services that you’ve been paid to do, you can be held liable. And here’s where it gets even hairier—you can be sued even if you’ve delivered exactly what you said you would!

He said … she said?

Your business is pretty straightforward, right? Let’s say that you are contracted or hired to design a website, for example. You present your design, lay it all out for the client, and have a contract that describes all of the services that you’re going to perform. Yet, at the end of the project, after it’s all completed, your client slaps you with a lawsuit, claiming you did not deliver. If you’re thinking that this can’t happen to you or that a contract protects you from a lawsuit, sadly, you’re mistaken.

The statistics on these types of suits, which account for 81 percent of the over $105.4 billion in annual liability cases in the United States, tell us otherwise. Here’s why: even when what you’ve delivered is right on the money, these types of claims usually originate from other factors, including:

 

  • • Expectations of the client that were unmet (even if they are way out of the realm of your services)

 

  • • Misunderstanding of what you’re able to do or any limitations of your profession

 

  • • Not clearly reading or understanding the contract

 

  • • Conflicts in personality that cause difficulty in negotiating or working together well

 

  • • A client is simply unhappy with your work

 

Do they have a leg to stand on?

So you had a contract, delivered what you said you would, and you still get sued for a seemingly unfounded claim—does your client even have a case? Unfortunately, even if cases never make it to court, they can cost you thousands of dollars in legal fees. Once a formal complaint is filed against you, the ball is in your court to defend your company and yourself, which means you need an attorney. And of course, if you do end up in court the expenses can exceed tens of thousands of dollars, even if you win.

Protect your business and yourself!

The cost of litigation in these types of cases ranges from $3,000 at the low end to upwards of $150,000. And if you’re like most small businesses, figures like these can greatly damage your livelihood. Protecting your company against lawsuits is critical. No matter what services you provide, you need an insurance policy that will cover you in the event of a claim of this nature.

Errors & Omissions or Professional Liability Insurance

E&O or professional liability insurance will protect your company in the event that a client files a formal complaint against you. Companies in a service-related business or independent contractors that can be sued for such things as breach of contract, making an inadvertent error, or not completing a project, can ensure they are covered, even when they’ve done nothing wrong. Coverage includes:

  • • Legal fees

 

  • • Court costs

 

  • • Judgment and/or settlement costs

 

Remember that having a contract doesn’t always offer you complete protection. You can still be sued by a client who is just not happy with your work or who expected something more or different than what was agreed upon.

Small businesses and independent contractors can suffer greatly when a lawsuit is filed against them. Depending on how costly it winds up being, a suit can even cause you to have to close your doors. Be sure you are covered at all times by getting the right insurance policy. Talk to us about the appropriate coverage and for any of your business insurance needs—we offer a wide array of solutions and can customize any of them to suit your specific situation.