Many frivolous lawsuits are brought to punish businesses. They have little legal merits and very little chance of being won but are good for tying up a business in legal matters – with the accompanying costs for defending the company – and can make it difficult for small businesses to continue operating.
Defending yourself from frivolous lawsuits can be time consuming and expensive, so the best way to protect your business is by avoiding the situation that prompts a lawsuit in the first place. Obviously, there will always be people who think they can game the system but there are steps that a business can take that will minimize the impact of a frivolous lawsuit whether it goes to court or is settled.
- Liability Insurance is Important
Liability insurance is dirt cheap compared to what you can lose in any lawsuit, whether it is successful or not. Attorneys charge by the hour and with the current rates it doesn’t take long to run into multi-thousand dollar fees. Umbrella insurance can be used to defend your business against claims and should be considered necessary, not optional.
- Create an Asset Protection Plan
Create or update a list of everything you own and what it is worth. Review your insurance policies with an eye on what you would lose if a lawsuit was filed against you. Talk with your attorney and insurance advisor to determine the best level of insurance for you and your business.
- Form a Corporation or Limited Liability Company to Protect your Assets
Speak with your attorney about forming a corporation or limited liability company (LLC) to protect your personal assets. A subchapter S or C corporation or LLC keeps business assets separate from personal and makes it much more difficult to be hurt personally through lawsuits.
- Create a Risk Management Program for your Business
There is no excuse for having unsafe risks in your business. Start a program to fix problems and keep an eye out for situations that crop up. Falls caused by spills on floors is a clichéd frivolous lawsuit, but it has become a cliché because it works with lawyers and courts. Establish a program to watch for and fix problems before a customer or visitor becomes involved.
- If an accident happens, document everything
Almost everyone carries a camera and video camera with them these days. If an accident occurs at your business, document everything with pictures and video. Get images of the accident scene, the victim and – if possible – record a statement from them and witnesses about what happened. Facts can be uncomfortable things in a lawsuit, it is better to have them on your side as opposed to relying on hearsay
According to representative of Herman, Herman & Katz, LLC Law firm, “frivolous litigation for personal gain has given personal injury attorneys a bad reputation. It also means that businesses need to do everything in their power to protect themselves against spurious claims and lawsuits.”
Our country is litigation crazy. It is usually easier for con artists and fraudsters to target large corporations with deep pockets, but any business has the potential to be a mark for frivolous lawsuits. The perpetrator knows that there is a dollar amount where it is cheaper to pay them off than it is to fight them through lawyers and courts. No matter how small your business is, it has the potential to be targeted by unscrupulous con artists willing to do anything to make a quick buck.
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