10 Easy Ways to be Greener

by Rieva Lesonsky22. April 2014 08:27

Woman cycling in office clothes

where that meant spring cleaning, you’ve probably already initiated some kind of spring cleaning process in your small business. This spring, there’s a lot to do in addition to sprucing up your office space. You might want to dust off your business plan to make sure you’re still on track, reevaluate your insurance needs and analyze your expenses. And in honor of the 44th anniversary of Earth Day (today!), you may want to incorporate some greening of your business.

Here are some green facts to consider:

  • About 864,883 people rode a bicycle to work in 2012. This equals about 0.6 percent of the American work force. Approximately 3,969,058 people (or about 2.8 percent of the American work force walked to work in 2012. (U.S. Census Bureau)
  • The average person generates 4.5 pounds of trash every day; that’s about 1.5 tons of solid waste per year. Although the EPA estimates that 75 percent of solid waste is recyclable, only about 30 percent is actually recycled. (GreenWaste)
  • 12,000 computers are discarded every day in the U.S. alone. That’s 41.1 million desktops and laptop computers per year. (Electronics Takeback Coalition)

How can your business be a better partner to the environment? Here are 10 easy ways to be greener:

  1. Sell and encourage customers to use reusable bags. Print your name and logo on the bag and you’ve created a great marketing tool. Then offer small discounts to customers who bring and use the bags in your store. You can also use the bags as giveaways at local events.
  2. Buy and use green office products in your business. Everything from staple-less staplers and environmentally safe correction fluid is available online. Think less landfill.
  3. Encourage your employees to carpool or leave the car at home and walk, bike or take the train to work. You’ll need to set the example, of course. Offer incentives such as green points that can be redeemed for perks such as time off. Then implement one or two telecommuting days, so employees don’t have to get on the road at all.
  4. Do you really need a hard copy of that email? Probably not. Just make sure your computer files are regularly backed up and you can save almost everything electronically, rather than in hard copy. If you must print, buy and use recycled paper. Also, print on both sides of the paper and set your printer to an eco-mode if it has one.
  5. Turn off your computer when you’re not using it. Also, replace any Cathode Ray Tube (CRT) monitors with flat screen monitors. Flat-screen displays consume only about one-third the energy of a CRT monitor. Of course, you are using Energy Star compliant computers, monitors and printers, right?
  6. Turn off lights when rooms are not in use, replace all light bulbs with compact fluorescent lights (CFLs) and paint your office walls with high gloss and lighter colors to reflect more natural light.
  7. Use rechargeable batteries.
  8. Replace paper towels in bathrooms with air hand dryers.
  9. Have employees use mugs instead of paper or Styrofoam for coffee and water.
  10. Set up a green suggestion box and get ideas from employees. The more you get them involved in the effort, the more they’ll feel a sense of community.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+   and Twitter.com/Rieva and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

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Malpractice Lawsuit Tips for Attorneys

by J Easto21. April 2014 08:50

Lawyer looks concerned over a folder

Attorneys are at risk for errors & omissions claims – complaints made by clients that allege you’ve made a professional mistake – because they offer expert counsel and advice. Your clients often have a lot at stake (money, time, and emotional investment) during your partnership, which means an undesirable court decision can easily spur another lawsuit. Only this time, it’s directed at you.

In your industry, E&O claims are often called “legal malpractice” claims. Insurance providers might even use the word “professional liability,” but they all mean the same thing: your law firm is being accused of professional negligence.

You know better than most how expensive a lawsuit can be – even if it never goes to trial. What’s worse? According to a 2008 study by the American Bar Association (ABA), nearly 35 percent of legal malpractice claims are brought against firms with only one attorney.  Another 30 percent of claims are brought against firms with two to five employees.

Below we discuss the common situations that can spur legal malpractice claims and what attorneys can do to prevent them.

Common Situations That Lead to Legal Malpractice Claims

Legal malpractice is a serious allegation – one that can tarnish your professional reputation. As you may already be aware, many legal malpractice lawsuits turn out to be unfounded. But that doesn’t mean a frivolous claim can’t cost an attorney’s firm time and money.

The best way to prevent claims is to know what you’re up against. Below are the five most common legal malpractice claims filed against attorneys, according to the ABA:

  1. Failure to know / properly apply law (11.3 percent). These claims allege that an attorney didn’t do her research properly or that she did her research but did not properly apply it to the case at hand. It can also apply to situations in which the attorney fails to recognize the legal implication of known facts.
  2. Planning error (8.9 percent). These claims allege that, despite understanding all the facts of the case, an attorney made an error in judgment or strategy.
  3. Inadequate discovery / investigation (8.8 percent). These claims allege that the attorney did not do his job well enough during the discovery / investigation portion of the proceedings.
  4. Failure to file documents: no deadline (8.6 percent). These claims involve failed filings where there are no deadlines but filing the document would benefit the client.
  5. Failure to calendar (6.7 percent). This happens when an attorney knows about a deadline but forgets to make note of it, which results in a missed deadline.

Case Study: A Legal Malpractice Lawsuit

In 2011, the ABA commented on a legal malpractice case in which a law firm was sentenced to pay over $100 million to the plaintiffs for restitution and an additional $12.5 million in punitive damages.

The case involved two individuals, Evans and Cagle, who allegedly retained the law firm to “prepare documents to form a new company.” Evans asserted that the law firm helped Cagle use funds from both Evans and the new company for his own personal gain – and that the law firm helped Cagle hide it.

Cagle had been the firm’s client before this engagement, and the law firm asserted that they did not officially represent Evans as a client. As it turns out, the jury decided that the firm and Evans did have a relationship, based on an engagement letter and other evidence.

How Attorneys Can Prevent Legal Malpractice Lawsuits

While some legal malpractice lawsuits are unavoidable, many can be prevented with a few simple steps. Our tips below have been summarized from the Knoxville Bar Association’s website, which offers some practical advice:

  • Don’t give casual legal advice. Not even to your friends! It may be tempting to chat about legal matters to a friend over dinner, but if they take that casual legal advice and suffer a loss, they may sue you for the damage. Encourage friends and neighbors who seek your counsel to make a formal appointment and treat their case the way you would with other clients.
  • Always assess clients yourself. The Knoxville Bar Association warns that asking a member of your staff to screen a case could be considered “below the standard of care.”
  • Manage your calendar. As we’ve seen above, many legal malpractice lawsuits stem from calendar errors. Another percentage is caused by clerical errors. That’s why it’s so important to develop specific calendar protocol within your office. That way, everyone can stay on the same page.
  • Don’t procrastinate. Most clients understand that you are busy and cannot be available at their every whim. But do respond to your clients within a reasonable amount of time. When your clients are happy, your firm is less likely to encounter a malpractice claim.

Unfortunately, it may be impossible to prevent all legal malpractice lawsuits. That’s why attorneys can add Malpractice Insurance (aka Professional Liability/Errors & Omissions Insurance) to their small business insurance plans.

For more prevention tips, check out “How & Why to Prevent Malpractice / Professional Liability Lawsuits” on our blog.

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Malpractice Lawsuit Tips for Nursing Homes, Hospices, and Home Health Aides

by Ruth Awad18. April 2014 08:16

Happy-go-lucky nurse pushing man in hospital

When others place their loved ones in the care of nursing homes, hospices, or home health aides, their expectations are high. They trust in your professional expertise to offer their senior family members the assistance, supervision, and respect they deserve. And when something goes wrong, your patients’ family members may be more inclined to sue your small healthcare business, believing you betrayed their trust.

After all, there’s already plenty of public anxiety surrounding nursing homes and hospices. Most people can immediately recall allegations of elderly abuse and neglect that they see on the news. These cases not only hurt the public image of elderly care facilities – they also leave your business more susceptible to malpractice lawsuits.

Take this article from The Ledger, for example. It details the years-long lawsuit against Oaks Healthcare Center, a nursing home in Florida. Arlene Townsend, a patient at the facility, repeatedly fell at the center and died (at age 69) after staying there for three years. Her son sued the nursing home, alleging it failed to properly supervise his mother. The jury awarded more than $1.2 billion in damages.

How can you ensure a similar fate doesn’t happen to your healthcare business? Keep reading for lawsuit triggers to avoid and tips for preventing negligence claims.

Malpractice Lawsuit Triggers for Nursing Homes, Hospices, and Home Health Aides

The following are the most common reasons why hospices, nursing homes, and individual home health aides are sued for professional negligence:

  • Failure to adhere to standards of care. Say, for example, you fail to institute proper fall protocol. You could be sued for negligence because most nursing home, hospice, and home health professionals should know how to handle these situations.
  • Failure to use equipment in a responsible manner. If the equipment misuse harms the patient, your healthcare business could be held liable.
  • Failure to communicate. Poor communication is one of the most common reasons for a malpractice lawsuit. Not only can proper communication help you manage client expectations, it can also limit potential mistakes when caring for patients.
  • Failure to document. The court may view an undocumented action as an action not done. Document all pertinent patient assessments, progress, and care plans.  
  • Failure to act as patient advocate. As a healthcare professional, your patients rely on you to act in their best interest. If they or a family member feels you didn’t advocate for optimal care, you could be sued.

Remember, you don’t need to make a mistake or oversight to be sued for malpractice. If a family member is simply unhappy with the level of care you offer, they could sue to try to recoup the money they spent on your services. To learn more about malpractice / professional liability, read our post “Understanding Malpractice / Errors & Omissions Lawsuits.”

Nursing Home and Hospice Owners: Reduce the Risk of Being Sued for Malpractice

The best way to avoid malpractice lawsuits is to be prepared for unexpected snafus that may come up while caring for elderly or high-needs patients. Here are several best practices that reduce your professional liability exposures:

Document correctly.

Your records can make or break a case against your healthcare business. For hospices and nursing homes, be sure to implement strict protocol for documenting patient assessments and developments. Any deviations from the patient’s normal state should be noted. Include what time you found this information, when you communicated it, and to whom. Also, chart all medications given, the time they were administered, and dose changes.

If you’re a home health aide, keep notes on your client’s eating habits, activities, and emotional state.

Date, time, and sign every entry.

Malpractice lawsuits often boil down to the time events happened: when the patient took a downward turn and how long it took your healthcare business to find out. That’s why all your documentation and notes should be dated, time stamped, and legible.

Make sure you have the help you need.

Understaffing can lead to rushed care, a lack of supervision, and a wealth of other problems. Even if you are shorthanded, you still have a legal and ethical duty to provide all patients with a professional standard of care.

Develop good relationships with your patients.

Perhaps the single best way to avoid a malpractice lawsuit is to develop good relationships with patients and clients entrusted to your care. Most of the time, people are less inclined to sue someone who looks out for them and treats them with dignity and respect.

For more tips on how to prevent professional negligence claims, read “How & Why to Prevent Malpractice / Professional Liability Lawsuits.”

How Nursing Homes, Hospices, and Home Health Aides Can Handle a Malpractice Suit

It’s common knowledge that lawsuits are a drain on your time and resources – especially if a court rules in the plaintiff’s favor. Though only 25 percent of medical malpractice lawsuits succeed, the price tag attached to these claims are among the highest. (Check out Above the Law’s infographic “We the Plaintiffs” for more details.)

That’s why, in addition to adequate risk management planning, you should carry Malpractice Insurance as an extra safety measure. This policy can help you pay for…

  • Attorney’s fees (which can be a small fortune – even if the lawsuit is ultimately dropped).
  • Settlements or judgments.
  • Other court costs.

Plus, most Malpractice policies include a “duty to defend” provision, which means your insurance provider will handle your legal defense (such as hiring a malpractice lawyer) for you.

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Malpractice Lawsuit Tips for Dentists

by J Easto17. April 2014 08:32

Young blonde girl in dentist chair

Like other healthcare professionals, dentists must be vigilant about the types of situations that can lead to expensive malpractice lawsuits. When patients accuse dentists of “malpractice,” they are alleging that the dentist’s services or advice violated a professional standard of care. In other words, your work failed to meet reasonable expectations based on your professional training and experience. (Learn more about malpractice by reading “What is Malpractice (Professional Liability)?” on our blog.)

Unfortunately, malpractice lawsuits are not uncommon. According to the U.S. Bureau of Justice Statistics, 16,397 tort cases were decided by a bench or jury trial in 2005, and 15 percent of those were medical practice cases. Another Bureau of Justice report concludes that roughly 5 percent of all medical malpractice trials involve dentists.

What’s worse? These numbers don’t account for all the cases that are dropped, dismissed, or settled out of court – all of which can still cost a small dental practice time and money. The median price tag for a dental malpractice judgment (according to the Bureau of Justice) is around $53,000 – which doesn’t include the cost of legal defense. But dropped and dismissed cases can still cost dentists between $2,000 and $5,000 (or more).

The solution? Stop medical malpractice lawsuits before they happen. Below we share some tips on how to do just that.

What Kinds of Disputes Can Lead to Dental Malpractice Claims?

As we mentioned earlier, dental malpractice claims make assertions about the quality of your work. It’s important to realize that many claims (sometimes referred to as “frivolous claims”) have absolutely nothing to do with your work. You don’t actually have to make a mistake or violate a standard of care in order to be sued for malpractice. Some people just want to watch the world burn.

That being said, it’s important to be aware of the common malpractice claims made against dentists. These include:

  • Failure to give a patient all the information she needs. For example, a patient could claim that you didn’t fully describe all possible treatment options and the associated risks, which means the patient couldn’t make an informed decision about her dental care.
  • Failed treatments or procedures. This could include claims of tooth damage or injury from botched restorations, root canals, implants, veneers, crowns, and more. Patients can also claim that you failed to spot decay or another problem during a routine oral exam, which led to greater, more expensive problems.
  • Questionable professional advice. A patient can claim that you failed to provide solid professional council. They can also claim that you failed to refer them to a specialist when it was necessary.
  • Products liability. Dentists can be blamed for using faulty products, oral devices, and materials – even though the dentist did not manufacture the items.
  • Nerve damage. Common claims allege that a dentist damaged the lingual nerve or inferior alveolar nerve while giving anesthesia or removing teeth.
  • Misdiagnosis. Patients can claim that you diagnosed a condition incorrectly, that you diagnosed it late, or that you failed to diagnose one at all.

You can read more about what to expect when a patient files one of these claims by reading “Understanding Errors & Omissions (Malpractice) Lawsuits” on our blog.

Case Study: A Real-Life Dental Malpractice Lawsuit

In the 2006 Florida court case Johnson v.Swerdzewski, dentist Frank Swerdzewski, D.D.S, was found liable for dental malpractice. The plaintiff, Jon Johnson, went to Swerdzewski for a toothache caused by a chipped molar. When the dentist administered anesthesia, part of the injection needle broke off in Johnson’s gum tissue.

Swerdzewski couldn’t remove the needle and referred Johnson to a specialist. Two surgeries later, the needle was successfully removed. That’s when Johnson sued Swerdzewski for dental malpractice. The jury ultimately decided in favor of Johnson.

What Dentists Can Do to Prevent Malpractice Lawsuits

The best way to “win” your malpractice lawsuit is to stop them before they happen. Here are some tips that you can try in your office:

  • Don’t avoid the Dental Board’s letter. At some point or another, you’ll probably receive an inquiry from the Dental Board that must investigate all complaints – even if they are unfounded. More likely than not, the complaint filed against your practice will also turn out to be unfounded, but you need to cooperate with the Board in order for them to properly investigate and conclude that the claim is baseless. You’ll also want to contact your insurance provider so that it can be on the alert and recommend legal counsel, if necessary.
  • Communicate clearly with your patient before treatment. Never start treating a patient until you are sure they understand exactly what you are going to do and the possible risks involved. Don’t take for granted that your patient has some background knowledge of dental procedures. Speak plainly and be sure to encourage them to ask questions. You may even want to have your patients sign a consent form that states they understand the treatment and its risks.
  • Always follow up with missed or cancelled appointments. Your office should have written protocol in place for following up with patients who miss or cancel an appointment – even if it’s just a six-month cleaning. A missed appointment means you might miss the opportunity to diagnose a condition as soon as possible, which leaves you vulnerable to claims of negligence.
  • Stay in your comfort zone. If a patient comes to you with an issue that you aren’t comfortable diagnosing or treating, always refer them to a specialist that you trust. If you decide to go ahead with an extraction that ends up failing, a patient (and his lawyers) can argue that a specialist would have been a safer route and that you should have known better.
  • Keep accurate records. Do this even if that means recording the fact that you broke an instrument in a patient’s canal. Breaking the tip of the file in the canal does not violate a standard of care, but it should be noted, both to the patient and in the patient’s file. If there is a complication or if the patient finds out about it later, they may be surprised, angry, and ready to file a claim against your practice.
  • Never erase anything in a patient’s chart. Not even mistakes! If you do accidently record a mistake in a chart, simply cross it out and note that it is an error. If that patient sues later and your records are examined, it’s going to look suspicious if entries have been rubbed out. For the same reasons, you should never add information to a chart (if only to clarify) once a patient has filed a claim.

Despite all these precautions, it’s still a good idea for dentists to carry Malpractice Insurance (aka Professional Liability / Errors & Omissions Insurance). This coverage can help you find a malpractice lawyer and pay for the costs associated with a lawsuit (defense fees, court fees, settlements, and judgments).

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Errors and Omissions Lawsuit Tips for Real Estate Professionals

by Ruth Awad16. April 2014 08:38

Real estate agent in front of Sold sign

Real estate and title business owners are especially susceptible to professional liability (aka errors and omissions) lawsuits because they handle expensive property transactions. Because there are thousands of ways a real estate transaction can go awry, there are also limitless possibilities for bringing a lawsuit against your small business. For instance, you could be sued if…

  • A disgruntled buyer gets buyer’s remorse and alleges you didn’t act in their best interests.
  • Your advice fails to meet a client’s expectations.
  • You fail to document decisions or actions.
  • A client alleges you didn’t tell them about water damage in the house and tries to recover the cost of mold remediation from you.

You don’t have to actually make a mistake to be sued for professional liability, either. So long as the client perceives that your services lead to financial losses, they could bring a lawsuit against you.

Keep reading for tips on how to recognize the events that can lead to E&O lawsuits and how you can manage your professional liability risks.

Reasons Why Real Estate and Title Brokers Are Sued

What can put your real estate or title brokering business at the center of a million-dollar lawsuit? Here are some common triggers for E&O claims:

  • Misrepresentation of the property condition, boundaries, or size.
  • Nondisclosure.
  • Failure to verify information given by the seller to the buyer.
  • Undisclosed or undetected water damage, infestation, or sewage or septic problem.
  • Errors in the home inspection (e.g., the inspector failed to note cracks in the foundation, a leaky roof, etc.).
  • Violations of your state’s real estate regulations (e.g., fair housing rules).
  • Error in zoning interpretation.
  • Error in comparative market research report.
  • Inaccurate appraisal.
  • Inadvertently offering bad or inaccurate advice.
  • Bank mortgage error.
  • Breach of confidentiality.

So say, for example, a homebuyer alleges that your MLS listing embellished the property’s features. Because it is your responsibility when showing a house to explain the features of the property, the buyer sues your real estate business, claiming that you misrepresented the house.

How to Manage Real Estate Professional Liability Risks

Keep those common errors and omissions triggers at bay with a thorough risk management plan. This might include…

Creating universal standard procedures.

Be sure to treat all clients equally, regardless of their spending abilities. You should always keep up to date on fair housing laws so you don’t accidentally make a mistake when helping someone buy or sell a home.

Document client communications.

When you are sued for professional liability, you will need records to prove your business isn’t liable for negligence or other wrongdoing. Be sure to document and properly store all client communications, but especially any challenges that arose during the process.

Be careful when choosing inspectors on behalf of your clients.

Let’s say you facilitate the sale of a newly constructed home. After closing, the buyer discovered water intrusion defects on the property. However, the inspector you hired didn’t make note of any of these alleged defects. That’s why the buyer decides to sue you: because it was your responsibility to select an inspector who specializes in roofing and foundations. To avoid this scenario, be sure to vet your specialists based on their reputation, expertise, and references.

Don’t offer advice outside your realm of expertise.

Buyers rely on your expertise to guide their purchasing decisions. So if you encounter a situation where you’re not sure what the “correct” answer may be, avoid offering an opinion. Instead, refer your client to someone who can offer the advice they’re looking for.

Don’t misrepresent or exaggerate a property’s features.

Always verify the information you receive from a seller before you inform the buyer. If you accidentally repeat a seller’s exaggerated claims about the property, you could be sued for someone’s oversights (or outright deceptions). Say, for example, a seller claims the property is 1,582 square feet, and you list the property as such. If the property turns out to be only 1,282 square feet, the buyer could for the diminished value of the property based on the square footage discrepancy.

Disclose flaws in the property.

To avoid being sued for negligence and breaching fiduciary duty, be sure you disclose a property’s flaws before a sale ever takes place. Let’s say you are a real estate agent representing sellers in the sale of their residential property. If undisclosed flaws are discovered after closing, the buyer could try to recover current and future repair costs from your small business.

Keep your promises.

Never make a promise you can’t keep, lest you want to risk a lawsuit. This means never promising that a property could be bought or sold for a certain price or preemptively saying a seller will pay for closing costs when you are still waiting on confirmation.

Make your deadlines.

A real estate transaction is punctuated with deadlines to ensure a smooth sale. To ensure you aren’t the reason for any delays, be sure to submit paperwork by the stated due date to avoid unexpected cancelled agreements.

How Professional Liability / E&O Insurance Saves Your Real Estate Business Millions

In a California lawsuit (Smith v. DiNapoli), a dual real estate agent (someone who represents both the buyer and the seller) facilitated the sale of high-end subdivision property to a buyer. The agent made an error while preparing the contract, leaving out the provision that the seller would be paid additional compensation once the lot split was approved. The seller sued the agent and was awarded almost $1 million.

Make sure a client’s dissatisfaction isn’t the downfall of your small real estate or title business. Instead, implement a thorough risk management plan, and be sure to purchase Professional Liability / Errors & Omissions Insurance as a failsafe when your prevention efforts simply aren’t enough.

This policy offers your real estate brokerage business coverage for…

  • Legal defense costs.
  • Damages payable to clients because of problems with your work or advice.
  • Third-party discrimination.
  • Punitive damages.
  • Joint ventures as insureds.
  • Final adjudication language for fraud claims.
  • Spousal liability.
  • Personal injury offenses.
  • Bi-lateral extended reporting period.
  • Duty to defend (i.e., your provider orchestrates your business’s defense for you).

To find out your Errors and Omissions policy options, talk to an insureon agent today. We can help you find competitive minimum premiums at various limits.

how is your business exposed

5 Ways to Network Your Way to Success

by Rieva Lesonsky15. April 2014 08:42

Three business people eating lunch and talking

One of the most important lessons I’ve learned since starting my own business six years ago is that, as John Donne famously wrote so many years ago, “no man is an island.” In order to succeed, we small-business owners need to encourage and support one another. Being an entrepreneur can be a lonely adventure when you’re the boss and no longer have coworkers to share your challenges and triumphs. (You have to be careful what information you share with your employees.) Meeting fellow entrepreneurs can not only help you find simpatico people to talk to, but could possibly deliver other business owners to partner with.

The key to finding the right business support system is networking. Here are a few ways you can network for success:

  1. One successful entrepreneur I talked to recently told me how in the beginning of her business she was a “professional networker.” She attended every local organization meeting she could find, including networking groups and Chamber of Commerce groups. Look for trade organizations in your area as well as niche groups like women business owners or minority business owners. Consider offering to speak to the groups once you get comfortable. You’ll get more attention and make more connections if you’re seen as an expert in your field. Remember, you’re there not just to take, but to give as well.
  2. Ask people you meet to mention your business to anyone they think might be interested in your products or services. Bring plenty of business cards and be sure to get cards from everyone you meet.
  3. You can’t afford to be shy as a business owner. If you bring an employee along to an event, be sure that you split up to work the room. Head over to the refreshments area (where people are sure to congregate) to start a casual conversation. Smile, be friendly and show a genuine interest in people, and you’ll make connections.
  4. Hopefully you’ve refined your elevator pitch. You need to be able to briefly and clearly describe your business. Don’t use industry jargon and be sure to ask people you meet about their businesses as well.
  5. Don’t forget to follow up with potential partners after you meet. Connect with them on social media and make plans to get together for a more formal discussion “off-site.” Never try to pin anyone down for a commitment at a networking meeting, though, or you’ll come off as desperate.

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+   and Twitter.com/Rieva and visit her website, SmallBizDaily.com, to get the scoop on business trends or sign up for Rieva’s free TrendCast reports.

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Your Business Is Facing a Civil Lawsuit. Now What?

by J Easto14. April 2014 09:07

Gavel on pile of money

If your business ever faces a lawsuit, it will likely be tried as a civil case, as opposed to a criminal one. What’s the difference, you say?

Civil cases are brought to the court by someone (called the “plaintiff”) who says another party (called the “defendant”) did something to cause them an unfair loss. For example, one of your clients could claim your photography studio ruined his wedding day by not capturing certain moments. In order to “get even” for this perceived loss, the plaintiff usually asks for money or some other kind of restitution.

On the other hand, criminal cases involve crimes. These cases are used to regulate and reinforce the social laws that prevent us from being monsters that threaten the safety, health, or welfare of others. When a defendant is found guilty in a criminal case, they are punished for it. Some, for example, spend time in prison.

Think about the difference between criminal and civil cases this way: criminal cases lead to possible punishment, whereas civil cases aim to end in conflict resolution. Which is not to say that forking over your time, a $20,000 settlement, and $5,000 in lawyer’s fees won’t still feel like a punishment.

Read on to learn more about civil lawsuits and how your business can mitigate the high cost of litigation.

What Disputes Lead to Civil Lawsuits?

Since the goal of a civil lawsuit is to end a dispute between two parties (businesses, nonprofits, and individuals), it’s important to be aware of the “civil wrongs” that lead to these cases. Most civil wrongs small businesses encounter are called “torts.” Torts are divided into several categories, including but not limited to…

  • Property torts. Example: you are a pet groomer who specializes in show-dog styling. One day, you are working on a Pomeranian who falls off the grooming table and breaks two legs. The Pom’s show days are over. The pet owner sues you not only for the cost of veterinary care (in this case, the pet would likely be considered “property”), but also $500,000 dollars in damages since this award-winning pooch can no longer work the show circuit.
  • Liability torts. Example: your business sells a product that ends up giving a customer a severe allergic reaction due to an undeclared allergen. The customer files a lawsuit against your business. (For more information on this type of claim, read our blog post “5 Tips for Understanding Potential Product Liability.”)
  • Dignitary torts. Example: you are a freelance transcriber who tweets about one of your client’s shoddy payment methods. Your client sues you for defamation, claiming that the tweet is untrue and damages his business’s image. (Read more about this real-life case here: “How Commercial General Liability Insurance Can Protect You from a $82,630 Tweet.”)
  • Infringement liability. Example: your small brewpub names a beer after Starbuck’s Frappuccino drink. The corporate coffee giant threatens to sue you for trademark infringement. (Seriously. Read “How to Protect Your Bar or Café from a Starbucks Lawsuit” for more on this story.)
  • Negligence. Example: you own a learning center that offers tutoring services for grades K-12. The mother of one of your students is angry because her daughter needs to be held back a grade. She claims you weren’t doing the kind of job that is expected from a professional and is suing you for the cost of the tutoring and $150,000 in emotional damages to compensate for her child’s low self-esteem.

Unfortunately, small businesses are often the target of tort lawsuits. In 2008, they paid for 81 percent of all tort liability costs in the United States. As a small-business owner, you are most likely to be sued by an unhappy client, customer, or patient, even though most of these claims are meritless.

And some of the easiest claims to bring against a small-business owner are professional liability (aka “errors & omissions” or “malpractice”) claims. These lawsuits often deal with negligence – the allegation that your work does not meet professional standards. Often, these cases turn into “he-said-she-said” arguments that cost business owners a lot of time and money.

How Errors & Omissions Insurance Can Protect Businesses from Civil Lawsuits

Let’s imagine that you own the learning center from the previous example. You’ve already tried to resolve the issue with tips from our “How & Why to Prevent Malpractice / Professional Liability Lawsuits” post. However, the client is determined to bring the case to court, and you are served with a formal complaint.

Hopefully you have Errors & Omissions Insurance, which is going to make the next steps of the lawsuit process a lot easier. E&O coverage helps small businesses finance the cost of claims that relate to their services. If you have insurance, your first step is to contact your insurance provider immediately. Your provider will:

  • Help you find a lawyer that specializes in E&O lawsuits.
  • Manage your defense.
  • Pay for the cost of legal representation.

From there, your case could be dismissed, dropped, settled, or go to trial. For more information on how these lawsuits pan out, read “Understanding Errors & Omissions (Malpractice) Lawsuits” on our blog.

Remember: E and O Insurance can only protect you from one kind of tort liability lawsuit. There are other small business insurance policies that can cover the torts mentioned in the previous section. Contact one of our insurance agents to learn more.

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Lawsuit Funding Tips for Small-Business Owners

by Ruth Awad11. April 2014 08:00

Courthouse exterior

So you’ve been hit with an expensive errors and omissions claim. You have an idea about what to expect from this kind of lawsuit (and if you need a refresher, read “Understanding Malpractice / Errors & Omissions Lawsuits”). But now you’re wondering how you’re going to pay for all your legal defense expenses and any settlements or judgments made against your business.

There are a few options for generating the funds your business needs to survive a costly legal entanglement. Here, we’ll rank your small business’s professional liability lawsuit funding options, ranked from most viable to least:

Purchase an Errors & Omissions Insurance Policy

The easiest way to ensure you have the finances to weather a professional liability lawsuit is to purchase Errors and Omissions Insurance. You won’t even have to worry about hunting down a malpractice attorney as most of these policies include a “duty to defend” provision. That means you’ll enjoy…

  • Having your insurance provider orchestrate your legal defense on your behalf.
  • Securing financial coverage for your legal defense fees, settlements or judgments, and other court costs.

E&O Insurance is likely your most cost-effective option for mitigating unexpected lawsuit expenses. In exchange for a relatively affordable premium, you have access to millions of dollars’ worth of coverage.

Plus, having your own policy allows you to stay in control of your business’s future. You don’t have to bank on the charity of others or liquidate your assets to settle your losses.

Create an Account for Legal Defense Costs

Though having Professional Liability Insurance is your best lawsuit-funding option, you could feasibly set money aside every month in a personal legal defense fund. Usually, a “legal defense fund” refers to nonprofit charities that help pay for public litigation efforts. While these kinds of funds are tax-exempt, yours will not be because it is for your business’s interests.

This option may sound appealing at first, but consider this: between the costs of running your business, paying your employees, paying commercial rent and loans, and covering utilities, chances are you won’t be able to set aside enough to cover a $100k settlement or judgment. That’s why instead of squirreling away a little extra each month, your money would go further if you put that toward an E&O premium.

Borrow from Friends and Family to Pay a Lawsuit Debt

If you are fortunate enough to have friends and family with deep pocket and a charitable mindset, you might have some success pooling together resources to pay for your E&O lawsuit costs. However, relying on the kindness of others is a tenuous business protection strategy at best. After all, you never know when your friends and family will fall on hard times themselves.

Settle Professional Liability Losses with the Bankruptcy Option

Bankruptcy is a heartbreaking and stressful route – and an expensive one, too. According to an article by Entrepreneur, lawyer and court filing fees alone can quickly climb to $8,000 or $9,000. Plus, filing for bankruptcy hurts your business and personal credit scores for years to come.

Only consider bankruptcy as an option if…

  • Your bank account is drained.
  • You don’t have E&O Insurance.
  • You owe a debilitating amount of money toward a settlement or judgment.

Even if all three conditions are true, filing for bankruptcy may not be your best option. There’s no guarantee you can keep your house or other property. At the best, it can only buy you time.

If you’re a sole proprietor, you can file for Chapter 13 or Chapter 7 bankruptcy, which can be used for personal debts or business debts. If you’re an LLC owner, filing bankruptcy may not protect your personal property from collection if you’ve pledged your personal assets as collateral.

Here are the differences between filing options:

  • Chapter 7 bankruptcy. This allows you to sell your assets (save for property that's exempt under state or federal law) to pay off your debts. You only want this option if you’re trying to make a clean break from your failed business. Chapter 7 eliminates any unsecured business debts (such as lawsuit judgments). However, your credit rating will be negatively affected for several years.
  • Chapter 13 bankruptcy. You’ll use your income to pay off your losses after you propose a plan to pay off your debt over three to five years. The upside is that you don’t lose your property when filing for Chapter 13. Your credit will still be negatively impacted, though.

As you can see, both of these options should only be last-ditch efforts to scrap or salvage your business. Filing for bankruptcy is by no means an option you should plan to take. And it’s worth noting that some judgment liens can remain attached to your property even though you filed for bankruptcy (e.g., a lien on your house).

You can read more about bankruptcy in Nolo.com’s article “When You Can't Pay Your Business Debts: Personal Liability and Bankruptcy Options.”

On Lawsuit Loans and Why They Won’t Work

Lawsuit loans are cash advances given to claimants by a third party before a case is settled. In exchange, the lender receives a percentage of the judgment or settlement. If a case isn’t successful, the lender could lose money. For this reason, the third-party lender is usually very selective about the cases they fund, opting for the ones with the highest probability for success.

If you’re wondering whether you can get lawsuit loans to cover yourself when you’re sued, the quick answer is no. These “loans” are only available to plaintiffs (i.e., the person filing the lawsuit against another person or entity). Defendants (those on the receiving end of a lawsuit) aren’t usually funded.

And that may be a blessing in disguise. These loans usually have exorbitant interest rates attached to them. In some cases, interest and fees escalated to 76 percent of the loan amount in the first year. (Read more about that in “Lawsuit Loans Add New Risk for the Injured” by the New York Times.)

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Do Settlement Loans Make Sense for Malpractice Lawsuits?

by J Easto10. April 2014 08:42

Loan shark smoking a cigar, hands together

When a small business is served with a malpractice (aka “errors & omissions”) lawsuit – one that makes accusations about its professional services – owners often see a mountain of debt looming in the distance. A lawsuit can force business owners to take time off of work and lose productivity, not to mention the lawyer’s fees, court fees, and the cost of possible settlements and judgments.

(To learn more about malpractice, read “What is Malpractice?” on our blog.)

Since most small businesses don’t have large sums of cash in reserve, the prospect of a lawsuit can be terrifying. Where will you get the money? Usually when people don’t have enough money to make a big purchase, they can apply for a loan. There are such things as “lawsuit settlement loans,” but unfortunately, they aren’t for the people defending themselves against a lawsuit. Read on to learn more

Why Can’t Small Business Defendants Get a Lawsuit Settlement Loan?

Lawsuit settlement loans are designed to help plaintiffs pay for legal disputes when they’ve run out of funding for their case. Generally speaking, a plaintiff (the person bringing the lawsuit) can only receive this kind of financing when the case is likely to settle (or already in the process of settling) in the plaintiff’s favor.

(To learn more about settlements and lawsuits, read “Understanding Malpractice / Errors & Omissions Lawsuits” on our blog.)

Legal finance companies – the institutions that offer these loans – only “make bets” on plaintiffs they are pretty sure will help them make a return on their investment. In fact, legal finance companies insist that they offer “lawsuit funding” not “loans,” because if a plaintiff loses the case, they don’t have to pay back the money.

That’s the main reason why third-party companies won’t finance a defendant’s lawsuit – defendants (the person who the lawsuit was brought against) don’t ever stand to win money! There’s nothing in it for investors.

Before you start worrying that your clients, customers, or patients are plotting to destroy your business with a wallet full of Big Corporate Cash, consider the following:

  • Settlements loans can only offer money. They can’t help plaintiffs find a lawyer or give them legal advice.
  • Settlement loans are only offered to certain plaintiffs, such as those entangled in high-dollar personal injury cases (e.g., a plaintiff sues a drug company for adverse reactions to medication).
  • Lawsuit funding can be a pretty shady business. Since the funding technically isn’t a loan, most states don’t regulate it as a loan. This means finance companies can charge extremely high interest rates and demand short repayment periods.
  • Most plaintiffs don’t qualify for lawsuit funding. Remember, these finance companies only take on “watertight cases” that they are pretty sure will make them money. If your client or customer is filing an unmerited lawsuit, there is no way a finance company will offer to fund their case.

Of course, small-business owners need not be on their own when it comes to financing malpractice / errors and omissions lawsuits. That’s what Errors & Omissions Insurance is for.

How Small Businesses Can Finance an E&O Lawsuit

You may not be able to convince wealthy (and often corrupt, according to this New York Times article) investors to float your E&O lawsuits – but you don’t have to. Insurance products, such as Errors and Omissions Insurance (aka Malpractice or Professional Liability Insurance), were designed to absorb a business’s legal costs when it is faced with a lawsuit.

For a monthly fee, you can protect your business with E&O Insurance. In the event that your business is sued for malpractice or professional negligence, you will pay a deductible in order to unleash the protection power of the plan. This includes compensation for expenses such as…

  • Lawyer’s fees.
  • Legal investigation.
  • Court costs.
  • Settlements.
  • Judgments.

Plus, most E and O policies help you find a lawyer and manage your defense. Take that, questionable settlement funding!

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What Happens if I’m Sued? A Guide to Handling Errors & Omissions Claims

by J Easto9. April 2014 08:39

Close up of medical professionals standing in a line

Errors & omissions claims are the stuff of nightmares for most small-business owners – and for good reason. According to a study conducted for the U.S. Chamber Institute for Legal Reform [PDF], over 50 percent of small-business owners interviewed said they have been threatened with a lawsuit. And many of these suits are filed without merit.

Think about it: you could meet all of your professional obligations and still get slapped with an E&O lawsuit from a disgruntled customer who claims your work simply wasn’t up to snuff. Many E and O claims are based on a client’s perception and other subjective factors, rather than the actual quality of your work. (For more information about what spawns E&O claims, read “What is Malpractice (Professional Liability)?” on our blog).

Even though most errors and omissions lawsuits are dropped or dismissed before they ever reach the courtroom, simply receiving a formal complaint can be perplexing. To prepare yourself for what happens when your business is sued, keep reading.

When Should You Contact Your E& O Insurance Provider?

For the purposes of this blog, we will assume you have already tried to resolve the issue with your client or customer before it became a claim, but they just wouldn’t budge. (Don’t forget to learn more about E&O claim prevention here: “How & Why to Prevent Malpractice / Professional Liability Lawsuits.”) Now you’ve been served with a formal complaint.

The first thing you should do is contact your E & O Insurance provider. There are two important reasons for doing so:

  1. You may not receive benefits otherwise. Most E & O (aka Professional Liability) policies include a clause that describes how quickly you must inform your insurer of a lawsuit. If you fail to deliver the news within the given timeframe, your insurer may be able to deny your claim.
  2. Your insurer can find a lawyer for you. That’s right: many Errors and Omissions policies not only help you pay for legal defense, but they also help you find a lawyer who specializes in professional liability claims. Without this coverage, you would have to complete this difficult task on your own.

You lawyer will review the formal complaint and decide what your next move should be. If the claim seems unfounded, your lawyer may try to get the lawsuit dismissed on legal grounds. Your lawyer may also decide it’s best to…

  • Settle out of court. If the claim cannot be dismissed on legal grounds, your lawyer may reach out to the plaintiff’s (the person who initiated the lawsuit) lawyer with a proposal to resolve (or “settle”) the dispute out of court. With some negotiation, you may be able to get the lawsuit dropped with a simple apology or a promise. In other cases, you can settle with an amount of money, which your E and O Insurance can pay for. This method of conflict resolution is typically less expensive than going to trial.
  • Go to trial. If the plaintiff isn’t budging, you may have to prepare to go to court. But don’t worry – you and the plaintiff can still decide to settle at any time.

For more information on the mechanics of an errors and omissions lawsuit, check out our post “Understanding Errors & Omissions (Malpractice) Lawsuits.”

How to Keep Your Cool & Listen to Your E&O Lawyer

Finding yourself in the middle of an E&O lawsuit can be unnerving, but it’s important to remain calm and follow your lawyer’s instructions. Litigation is tricky business and even a seemingly innocuous remark – if overheard by the wrong ear – can hurt your chances of winning your case.

Errors & omissions lawsuits are already time-consuming and expensive – don’t make it harder on yourself! Here are a few general tips to keep in mind:

  • Don’t beat yourself up. Keep in mind that many errors & omissions lawsuits have nothing to do with your ability to do your job – despite what the plaintiff is claiming. Just realize that this lawsuit is a learning experience and there are steps you can take to prevent similar lawsuits in the future.
  • Be honest and thorough with your counsel. Even though the process might be scary, there is no point in lying to your lawyer or your claims representative. It will only hurt you in the long run. In addition, you should strive to describe the details of the claim with the greatest precision and accuracy that you can. For this reason, it’s a good idea to keep track of all client / customer / patient communication – especially when you suspect they are unhappy.
  • Mum’s the word. As with any lawsuit, you should never talk about your E&O claim with anyone – except your lawyer and claims representative, of course.
  • Never say you are “sorry.” You should never “admit guilt” without your lawyer’s consent. Even saying “I’m sorry” or “I apologize” to the plaintiff could be used against you in court.
  • Never make decisions without your lawyer. For example, you should never tell the plaintiff you’d like to settle without talking to your lawyer first. In fact, you shouldn’t talk (or write) to the plaintiff at all unless your lawyer is present.
  • Don’t touch your records. You shouldn’t allow anyone to look at the records related to your claim unless you’ve obtained approval from your claims representative. The records should never be removed, copied, or altered in any way – including any “clarifying” remarks you may wish to add, no matter how helpful they may seem. If your case goes to trial, the altered records could damage your integrity.

Besides helping you prepare for the best defense possible, these tips also help you stay on your insurer’s good side. In some cases, a failure to follow the rules could threaten your Errors and Omissions coverage.

The Cost of an Errors & Omissions Insurance Claim

Errors & Omissions / Professional Liability Insurance claims can be costly – even when they are dismissed or dropped. The cost of legal defense for a claim that never makes it to court can average between $2,000 and $5,000 dollars – a small fortune for many small-business owners. That’s why Errors & Omissions Insurance helps you pay for…

  • Legal defense.
  • Court fees.
  • Judgments & settlements.

Every year, small businesses that make less than $1 million in revenue pay around $33.9 billion in self-insured and uninsured commercial liability tort costs. See the Tort Liability Costs for Small Business report for more statistics – but don’t become one! Talk to one of our insurance agents for more information about adding Errors & Omissions coverage to your small business insurance plan.

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