Preparing for Uncertainty, Part 3


By Rieva Lesonsky

If there’s one thing that’s predictable about entrepreneurship, it’s that it’s unpredictable. In this special 7-part series, we’ll help you prepare for uncertainty, minimize risks and protect your business.

Did you know about 40% of small businesses are likely to face a property or general liability claim in the next 10 years? America is a litigious nation. Even if you’re not at fault in a lawsuit, defending your business in court can average more than $75,000 per case for one general liability claim, according to Insurance Journal.

What Legal Risks Are You Facing?

You might not think your business does anything that could expose you to a lawsuit. But something as simple as a customer slipping and falling in your retail store can lead to months of costly litigation. It could even end up costing you your business.

Here are some examples of legal risks your small business could be facing without you even realizing it.

  • One of your employees posts something on social media “trash talking” your biggest competitor. The competitor sues your business for libel.
  • Your marketing team is thrilled with their new ad campaign that plays off the “Got Milk?” ads—until you get sued for trademark infringement for using that catchphrase.
  • You own a sporting goods store and sell a scooter to a customer whose son is injured while using it. The customer not only sues the scooter manufacturer, but also files a lawsuit against your store seeking damages and medical costs.
  • While lifting a box onto your stockroom’s highest shelves, an employee falls off a ladder onto a cement floor. She hurts her back, requiring months of physical therapy and eventually surgery.
  • While filing a client’s taxes, you accidentally miscalculate a figure. The client ends up getting audited, is hit with IRS penalties and fines, and sues you for making the mistake that led to the audit.

Prepare for the Worst

When it comes to legal uncertainty, an ounce of prevention is worth a pound of cure. Fortunately, business insurance can help to cover your company against all of the risks above—and more.

Here are four types of business insurance that will help keep you out of hot water:

  1. General Liability Insurance: This should be part of every small business owner’s insurance kit. It protects you in case of claims of bodily injury, property damage, libel or slander, false advertising and more.
  2. Professional Liability Insurance: Lawyers, accountants, tax preparers, IT companies, real estate brokers and other professional service providers can benefit from professional liability insurance. Also known as Errors & Omissions or E&O insurance, it helps cover costs if you or your employees are sued for negligence or errors in providing a service. (Think of it as malpractice insurance for businesses.)
  3. Workers’ Compensation Insurance: Required by many states for any company with employees, this is great insurance to have even if your state doesn’t insist upon it. Workers’ comp pays benefits to any employee who suffers a work-related illness or injury. By covering lost wages and the cost of medical care, this insurance reduces the risk that an injured employee will sue your business. But if they do, it can also cover your legal fees.
  4. Commercial Umbrella Insurance: Does your business sell expensive products, provide costly services or work on big contracts? If you’re worried about having enough liability coverage, consider Commercial Umbrella Insurance. This can help pay additional costs of liability claim against your business exceeds your primary policy’s coverage. The Hartford’s Commercial Umbrella policy even extends the coverage of policies you have with other insurers.

You can’t eliminate all of the legal hazards of running a small business—but by purchasing the right business insurance, you can greatly reduce your risk. Learn more about what insurance a small business needs.

In partnership with The Hartford

Check out! Preparing for Uncertainty, Part 1: Is Your Small Business Prepared for the Next Disaster?

Check out! Preparing for Uncertainty, Part 2: Are You Ready for an Economic Downturn?

Legal challenges stock photo by Elnur/Shutterstock