Protecting Your Business from Litigation

Published by Marshall & Gibson Lawyers on the 19 July 2012

The threat of litigation can come from any quarter at any time, so you need to protect your business from exposure by having a comprehensive risk management plan. The following are some basic steps to take in order to limit risk, no matter what size your business may be.

Insure yourself

Businesses should have the following types of insurance:

  • Workers compensation — to protect your employees against work-related injury or illness
  • Professional indemnity insurance — to protect yourself against claims of negligence or malpractice if you are a medical practitioner, insurance broker, legal practitioner or contractor working for a government body
  • Public liability insurance — to protect your business against personal injury claims, if people injure themselves on your premises.

Have legal representation

You should find a good lawyer to represent your interests before the threat of litigation, not after it. Choose a legal firm that specialises in your kind of business or industry, and preferably one with local knowledge. No win no fee lawyers are a good option for small businesses with limited funds.

Write it down

Protect yourself from situations beyond your control by adding specific clauses to your contracts that will protect you from legal action. Also, keep detailed records of everything business related, in case you are ever sued or fall foul of the tax office. Accurate records can mean the difference between winning and losing.

Deal with complaints

Many lawsuits start out as complaints, so nip them in the bud before they have a chance to grow. Never ignore a complaint; try to resolve it amicably or, if it is blatantly untrue, refute it and record any and all communications between you and the complainant.

Separate your assets

Most small businesses start out as sole proprietorships without realising that if they were to be sued, their house, car and other assets would be included in whatever claim was made against the business. The way to separate yourself from your business is by creating a family trust, if you are a small business, or incorporating yourself, if you are a larger business.

Train your staff

Educate your employees about their obligations under the various laws regarding:

  • Privacy
  • Occupational health and safety
  • Sexual harassment
  • Discrimination
  • Bullying
  • Bribery and corruption
  • Trade practices requirements.

As an employer, you are often held accountable for the mistakes of your employees, so it is in your interests to ensure they know the regulations and abide by them.

Make sure you are compliant

Whatever kind of business you are running and whatever industry you are in, it is inevitable that you will have various compliance issues to deal with. Compliance training is the best way to ensure you and your employees are familiar with the latest legislative requirements and remain compliant at all times.

Every business large and small should have a comprehensive risk management plan, not only to protect against litigation, but also to ensure it is ready for any threat that might appear on the horizon.