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Not Getting Sued is Good: 10 Common Sense Insurance Tips for Small Businesses

If you ask a room full of veteran small business owners their opinion on Professional Liability insurance, you are likely to hear a wide variety of answers. The fact is that in business mistakes are bound to happen and clients will not always be satisfied. We all want to avoid harm coming to our livelihood (or at least minimize the effects of a potential lawsuit) and everyone has his or her own ideas about how to go about protecting themselves. Solutions that work for one industry segment or personality type may not work as effectively for another; some rely on luck, and others won’t take a client without multiple strategic precautions in place first.

Regardless of your professional style or business type, to prevent negative events from escalating to the courtroom requires relationship building skills and good old common sense. Here are a few thoughts on how to avoid a lawsuit:

1-        Do a great job.
You are a small business because you have a specialized skill so be exceptional at what you do for clients and don’t get sloppy. Double check, be cautious, follow basic rules and deliver what you promised on schedule.

2-        Be nice.
Treat your employees and clients with respect, honesty and kindness and they are less likely to sue you.

3-        Don’t sue others.
Do what you have to do but realize that if you sue, you need to be prepared for a countersuit. Always try and resolve problems outside of litigation first.

4-       Establish best practices.
Both internally and with clients having set procedures in place for all business processes will make it easier to set and live up to expectations.

5-        Use your intuition.
If you get a bad feeling about a potential client, try to avoid taking on the project. A 30-year small business owner once told me, “The best insurance I ever used was knowing which clients not to take.”

6-       Oil the squeaky wheel.
Sometimes you have a difficult or unreasonable client you can’t afford to refuse. In that case you may have to bite the bullet, reign in your ego and be humble and calm to finish the engagement with minimal conflicts. When you’re done, try to avoid them and clients like them.

7-        Write a solid contract.
Have a lawyer write you a solid contract that limits your liability and your exposure on each engagement to the amount of revenues generated from that client. Try at least to have a strategic plan in place for who is accountable if something goes wrong.

8-       Expect the unexpected.
No matter what you know, what you’ve experienced or what you’ve heard about, there are environments that are uncertain and potential exposures which you can’t envision. When you really focus on what makes you and your business vulnerable, you’ll realize that there are risks that are “controllable” and others that are “uncontrollable” and perhaps more that are “unknowable.”

9-       Assess your risk tolerance.
If you are a one-person company, as well as CEO, CIO, and CFO, you are also your own RM (Risk Manager). Eliminate any “unnecessary” risk that can be discarded without adversely affecting your income. Surround yourself with trusted advisers, plan ahead, keep the lines of communication open and identify and utilize all the resources at your disposal.

10-     Get insurance.
Insurance is a competitive edge. Litigation is a time-consuming, draining, frustrating and expensive way to solve a problem….or defend a bogus accusation. Being sued can, at its best put you behind schedule and at worst put you out of business or cause bankruptcy.  A close competitor without it will have less time to dedicate toward satisfying its customers and less money to enable the business to survive.

Insurance can’t prevent you from being sued but it can cover the cost of a lawyer and damages if you need it. By supplementing your business insurance policies with common sense, I think you’ll feel safer, clearer and more comfortable, about what can happen and potential consequences.  Although I strongly believe there’s a lot to be said for common sense, in today’s business world you still need to supplement your intuition and luck with appropriate insurance. BizInsure’s goal is to help you be an educated insurance consumer and eliminate redundancies or gaps in your coverage. If you have any questions about your insurance needs, we’re here to help.

BizInsure Guest Blogger: Tanya Weliky

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