How to Avoid Being Sued

October 5, 2005

Lift and Access Magazine

Death, taxes, and litigation have become certainties in the modern business world, yet a surprising number of otherwise successful enterprises are unprepared and ill-equipped to handle the uncertainties of litigation. Every day, foolish verdicts and outrageous dollar awards are reported in the media, while successfully defended lawsuits and trials resulting in small awards rarely get press attention. In this climate, one would think that every business would be prepared for litigation.

Unfortunately, most small businesses and many mid-sized companies are unprepared for the onset of litigation. Without a legal staff that is familiar with the many aspects of litigation, most of these companies have no plan whatsoever to deal with the next summons and complaint that may come their way. However, they can become prepared, easily and affordably. Here are some philosophies and practices that can minimize the possibility that your company will be sued, or alternatively prepare the company to defend any litigation in which it may find itself.

Pick The Right Business Partners - A surprising amount of business litigation happens because companies have picked the wrong business partners. This is particularly true with franchise agreements and with component suppliers. In each case, the performance of the business depends upon the good faith and performance of the contracting partner. The closer your enterprise is to the consuming public, the wider the net of your responsibility. Under-performing subcontractors can set you up for personal injury, wrongful death and warranty actions against which there may be no factual defenses. Therefore, it is important that the subcontractors have adequate resources and adequate insurance. Contracts should always have indemnity, hold harmless and defense agreements. It is also wise to become an Additional Insured on a liability policy purchased by your contracting partners.

Hire and Keep The Right People - It is almost too obvious to state, but it is the long-term, highly responsible employees who are most likely to minimize the possibility that you will be sued. If you are sued, it is these experienced and qualified employees who will number among your key defense witnesses. Every business needs employees who remember what happened and why.

Deliver a Quality Product or Service – Although delivering a quality product or service is another seemingly obvious preventive for litigation, often it is not enough to prevent a lawsuit when persons are badly injured. Nevertheless, the money and effort that is put into design and quality control often will pale in comparison to the expense of defending a major suit or to the cost of increased insurance premiums.

`Keep Your Promises - A lot of business litigation comes about because people are either unwilling or unable to keep the promises that they made in their zeal to make the deal or close the sale. It can be a very expensive mistake to promise what really will never be delivered.

Know Your Regulations - Over-regulation of the U.S. economy, and the business community in particular, has become routine. In 2003, 13,000 separate bills were introduced into the California State Legislature, most of them seeking to regulate conduct in one form or another. Violations of regulations often energize litigation. For example, a violation of a safety regulation is considered negligence per se under the law, and could result in a finding of liability irrespective of good intentions and best efforts. It is important, therefore, to stay current with regulations that affect your business by joining trade associations, subscribing to clipping services, and regularly consulting with legal experts in your field of endeavor.

Address Complaints ASAP - No one likes to receive complaints about their services or products, but it is imperative that there is a system in place to deal with critical feedback. If you do not evaluate complaints, you often will miss an opportunity to improve the product or stave off litigation. In various surveys, a number of plaintiffs have complained that they were ignored and not treated properly by the company that they eventually sued. An example of this is in the automotive field, where quick and appropriate response to customer complaints often eliminates any motivation to seek legal help or file a "Lemon Law" lawsuit. In addition, recognizing and evaluating complaints may provide useful feedback to the persons in your organization responsible for the quality of products or services.

Proof of customer complaints that have been ignored can become powerful evidence against your company at trial. Plaintiffs' counsel often will use online networks to identify and link together consumers from across the country with similar problems to provide testimony against a common defendant. Evidence that a common complaint was ignored over a period of time will tend to breed high verdicts and even punitive damages.

Get Legal Assistance Up Front - Getting legal help as soon as a problem is identified is undoubtedly going to save money in the long run. Corrective action can be taken, problems can be avoided and amicable resolutions may be hammered out with the correct legal advice. Remember, if the law is not your field of expertise, seek professional help from qualified attorneys.

Be Litigation-Savvy - Warnings are the last desperate refuge of the plaintiffs’ bar. When there is really nothing wrong with the design, and when the product has been made pursuant to that design, then the only actionable theory left is inadequate warnings. Warnings are a very subjective and qualitative field in which there seems to be no real science. Still, the legal system has forced companies to issue elaborate and sometimes ludicrous warnings to cover even the most improbable scenario. Anyone who has purchased a ladder, power mower, bottle of medicine or electrical appliance has seen just how far manufacturers and sellers have had to go to try to ward off the spurious claim of inadequate warnings. The best defense is a design that has been evaluated and found to be adequate in accordance with existing (though arguably flimsy) standards in the field.

Businesses of all sizes have the ability to avoid, minimize or win litigation. A good attitude, basic planning and proper legal advice are all that is needed to optimize the results.