A Small Business Guide to Errors and Omissions

Chapter 1: Malpractice Lawsuits: The Basics
Part 6: How to Prevent an Errors and Omissions Lawsuit: 7 Tips

Preventing an errors and omissions lawsuit is much more affordable than winning one. To keep your business out of court, keep these seven tips in mind.

  1. Be Careful

    If your business provides services, you can be sued. Your client's attitude toward your business will largely determine whether or not they decide to drag a dispute to court. For these reasons, be sure you check and double-check your work. A tax professional, for example, may run her numbers again to make sure she doesn't make an oversight that could cost a client thousands of dollars. A freelance writer might check his content against the terms of his contract to ensure he's delivered what he promised.

  2. Use Client Contracts

    Though contracts can't guarantee that a client won't sue you for supposedly breaching said contract, they can minimize your exposures by clearly spelling out your obligations to a client. Lay out the scope of your representation if you're a lawyer. Get in writing the exact services you provide if you're a marketing consultant.

    In addition to specifically outlining your services, your client contract should also provide…

    • Dispute resolution steps.
    • Fee agreements (including payment dates, hourly or per-project rates, and payment methods).
    • Project deadlines or check-in dates.
    • Both parties' signatures.

    In order to make sure your contract will hold water in court, it's always a good idea to have a lawyer review it.

  3. Communicate with Clients

    Managing client expectations is one of the key ways to prevent an E&O lawsuit. If they understand in no uncertain terms what they're getting from your business at the start, they have less room to feel disgruntled over the outcome.

    If a client complains about the progress or result of your work, be sure to take the time to respectfully and thoroughly address their concerns. Offer solutions rather than excuses. When a client feels as though they are being listened to and that their input is valued, they're much less likely to sue.

    Good communication means…

    • Sending your client updates on the status of a project.
    • Keeping clients updated about what you're doing for them.
    • Quickly resolving complaints.

    To learn more about how good customer service can spare you a hefty liability lawsuit, read our blog post, "6 Customer Service Strategies to Prevent Liability Lawsuits."

  4. Properly Train and Supervise Employees

    Remember that if your employee makes a mistake, your business can be held liable for neglecting to train or supervise them. Before you let your employees represent your business, ensure they have adequate training and supervision. For example, if you own a small medical practice, your staff will need to understand basic standards of care and how to avoid HIPAA violations.

  5. Refer Clients or Patients to Specialists When Necessary

    Sometimes, you will reach the point in your client relationship when you can no longer meet their needs. Knowing your limits can help you avoid allegations that your advice caused your client financial losses. If you don't know how to best advise a client, refer them to a specialist. For example, say you're creating a content marketing campaign for a client, and they want graphics to accompany the material. You'd want to reiterate the scope of your services and refer them to a graphic designer for their other needs.

  6. Keep an Organized Calendar System

    Regardless of your profession, missed deadlines or double-booked appointments can cause your clients to lose money. So be sure you keep an organized calendar, and don't stretch yourself too thin!

  7. Document Client Communications

    If you are hit with an E&O claim, having documentation of all client communications can help ensure you aren't wrongfully sued. Specifically, keep a record of advice or instructions that involve critical issues or outcomes (especially if they involve client instructions and decisions). Be sure you keep documentation of any follow-up correspondence, too.

Next: Part 7: The Cost of a Professional Liability Claim