Outlined below are just a few of the ways
your business may be able to avoid, or at least minimize, the financial
impact of expensive lawsuits.
Include "hold harmless" clauses
in your contracts.
One very effective way to limit your liability is to transfer the risk to
others through effective contracts and agreements. Specify what you're
responsible for…and what is someone else's responsibility.
Action Step: Transfer
risk contractually, by writing "hold harmless" clauses into your
agreements. These agreements specify that your company may not be held
financially responsible for any damage caused by subcontractors you hire
to provide services to your clients. Have your legal advisor review all
"hold harmless" agreements prior to signing.
Note: Although some states do not
recognize legal transfer of all liability by contract, these agreements
can still help define your financial responsibility.
Carefully maintain your interior
and exterior walkways.
Icy parking lots. Cracked sidewalks. Slippery steps. Unlit hallways. Any
of these seemingly minor conditions can trigger a major lawsuit…if someone
is injured on your premises because you didn't properly maintain your
Action Step: Focus on
preventing accidents by standardizing and implementing regular procedures
for maintaining your public areas. Make these areas safer by improving
Make sure you have enough
general liability insurance.
So how much is enough? That depends on how likely your business is to be
sued…which in turn depends on a whole host of factors such as what type of
business you're in, how often you have visitors onsite, how frequently you
make deliveries offsite, etc.
Action Step: Consult a professional insurance agent, broker
or risk manager who can help you assess your company's specific liability
risks and determine how much insurance protection you need.
Make sure you attend to
potential "claimants" quickly.
If your company or one of your employees damages someone's property or
causes an injury, it's critical that you immediately address both the
physical and psychological consequences.
Action Step: Let the
person know how concerned you are. Ensure that any injured person receives
immediate medical attention if necessary. Follow up with all parties after
the loss. The more seriously you take the situation from the beginning,
the less serious it may become in the end. You'll also want to review this
article for more tips on how to enhance the safety of your company
Know what your liability policy
does, and doesn't, cover.
It's just as important that you know what your general liability insurance
policy excludes as what it includes. Some policies exclude many risks,
while others only include specifically named risks, both of which could
you leave you dangerously underinsured.
Action Step: Ask a
professional agent to help you analyze your policy's exclusions. Consider
purchasing additional liability policies to cover specific risks that
aren't usually covered by general liability policies, such as auto
liability claims, malpractice lawsuits, and personal claims against your
directors and officers.
Safeguard your visitors.
Many liability claims arise when visitors are injured on your premises. So
it's essential that you take steps to ensure their safety.
Action Step: Establish
a program to identify, and properly escort, all visitors to your facility.
Keep visitors out of dangerous areas and away from machinery, vehicles, or