Insureon Blog

How to Avoid a Malpractice / E&O Lawsuit after You’re Sued

28. April 2014 08:30

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If you’ve read any of the posts in our malpractice / errors and omissions series, you may think that there’s nothing you can do when a client files a claim against your business other than hire a lawyer and prepare for trial. But that’s not always true.

You can suggest mediation, a concept that your client may have never even heard of. E & O claims are particularly good candidates for mediation because they often stem from hurt feelings and misunderstandings – not the professional errors they allege. Mediation gives both parties a chance to air their grievances and resolve a problem, all outside the formalities of the courtroom.

What Is Mediation?

Mediation is a way for disputing parties (e.g., you and a client who is unhappy with your work) to reach a resolution. It’s an alternative to full-blown litigation that can save everyone a considerable amount of time and money.

It’s also less formal than litigation. While there are specific steps to follow, lawyers are generally unnecessary. Instead, a mediator is present. A mediator is an impartial third party who helps you and your client reach an agreement. Mediators do not determine who is right or wrong in a dispute. They are simply there to assist.

Mediation can be suggested before or after an errors & omissions lawsuit is filed. A judge may even order you and your client to try mediation before the case can go to trial. Because you can’t always count on a judge to do that, you should at least try to put this option on the table.

To help steer your client toward mediation, emphasize all the benefits, which we outline below.

How Small-Business Owners & Their Clients Benefit from Mediation

Mediation tends to benefit both small-business owners and the unhappy party by…

The best part? Mediation expenses can usually be covered by your Errors & Omissions Insurance policy! But because mediation is relatively inexpensive, some small-business owners won’t need to file a claim with their insurance and risk raising their premiums.

What Is the Difference Between Mediation and Arbitration?

Arbitration is another way to resolve disputes outside of a courtroom, but it is distinct from mediation in several ways. For one thing, it’s more formal than mediation (though less formal than a lawsuit). An arbitrator (i.e., a neutral third party) listens to arguments from both sides, reviews the evidence, and then comes to a decision about the dispute. A mediator simply facilitates the discussion between feuding parties.

Businesses frequently write arbitration clauses into their contracts. For an example, a contractor may include an arbitration clause in their client contracts that says any disputes must be arbitrated. If a client signs the contract, they forfeit their right to sue or appeal the arbitrator’s decision. Arbitration tends to cost more than mediation but less than a lawsuit. Your E and O policy will likely cover the cost of arbitration, too.

To read more about how mediation can benefit you, read “Mediation for Small Businesses” on Nolo.com.

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Errors & Omissions | Errors and Omissions Insurance | Lawyers | Malpractice Insurance | Risk Management | Small Business | Small Business Risk Management | Tips for All Small Businesses

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