5 ways to prevent reputational damage lawsuits

Insureon Staff.
By Insureon Staff
February 1, 2019
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Your small business could be at risk of a costly reputational damage lawsuit even if no harm was intended.
A man whispering into the ear of another man in comic style.

No matter how big or small your business is, you run the risk of being sued for reputational damage if a business or individual believes you’ve caused harm to their reputation.

With reputational harm incidents, a false statement or even an accidental incorrect statement can be enough to spur a lawsuit. Use these five steps to protect yourself against defamation claims and costly legal expenses.

1. Don’t make negative comments about anyone

The best defense for avoiding a reputational damage lawsuit is to refrain from making comments, particularly in print or video, that could be considered negative or defamatory. Emotions play a strong part in reputational harm incidents. If a person or business feels attacked, they’re more likely to serve you with a lawsuit.

2. Avoid making statements that you know are not true

Never say anything that you know isn’t true, particularly in advertisements and social media. Any public business distinctions you make between you and your competitors must be anchored in reality. If you falsely characterize a competitor, you could be sued for defamation.

3. Educate employees about libel and slander

Educate your employees, especially those involved in social media, about the risks of libel (written defamation) and slander (oral defamation) and the consequences of saying something they shouldn’t say.

Employees need to understand that the results of expressing something that isn’t 100 percent true can have dire consequences. If a business has to respond to a scandal after an employee has behaved unprofessionally, it not only affects the employee who is at fault, but also other workers and your business’s bottom line.

4. Monitor and moderate what other people write on your website

Encouraging comments and discussion on your website and social media accounts can increase engagement with your community, but be mindful that online conversations can quickly turn negative and even abusive.

It’s important to monitor and control online conversations on your business sites so they continue to be a safe and respectful place for your customers and community. Use spam filters and have a comment policy in place that clearly outlines what is acceptable with online conversations.

5. Be quick to fix any errors or negligence in your work

If you offer a professional service, you’re not immune from making mistakes. Unfortunately, when an error occurs and it ends up damaging a client’s reputation, it can result in expensive litigation. If a business or individual believes you’ve made a mistake, be willing to investigate it and quickly correct it if you are in error. Be as public as possible about the correction and assure the client that you’ve made every effort to repair the mistake.

How to protect your business if it’s named in a lawsuit

Because reputational damage can result in lost profits, a reduction in brand name value, and more, it’s difficult to measure the financial impact of such an incident. For that reason, a reputational harm lawsuit can be drawn-out and extremely costly. Small business insurance can help manage those costs. Depending on the nature of your business and the context of the claim, two small business insurance policies may help cover your costs following a reputational harm lawsuit.

General liability insurance

General liability benefits can help if you’re sued for libel, slander, or defamation. The exception is if you’re a media company, in which case you would likely require professional liability insurance.

Professional liability insurance

If a client suffers reputational harm due to errors or negligence in your work (e.g., publishing something if you’re a media company), professional liability insurance may cover the cost of defending the resulting lawsuit.

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