Insureon Blog

Your Business Is Facing a Civil Lawsuit. Now What?

14. 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…

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:

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 othersmall 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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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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