How to Protect Yourself From Client Lawsuits

Client lawsuits are one of those things that every business owner hopes never happens, but they do from time to time. You might not think you will ever be sued by a client, and you may not, but you still need to make sure you are prepared in the event that a client does decide to file against you. Consider the following suggestions for how you can protect yourself and your business from client lawsuits.

Have the Right Insurance

Lawsuits from unhappy clients can drain your business dry and rack up a ton of debt. To prevent that from happening, you need the best commercial insurance. Such insurance is designed to help prevent you from having to spend all of your money on legal counsel if you are caught up in a lawsuit. Insurance will also help you cover any compensation that you owe your client if the client wins the lawsuit. This way, you can settle matters and still keep your business afloat.

Make Sure You Have Set Realistic Expectations

Although it is perfectly alright to be a dreamer, you have to set realistic expectations when it comes to things like production deadlines and shipping times. If you do not, your clients will start to have expectations that you cannot meet, and they might even take advantage of your lack of setting realistic expectations. For instance, if a client wants a product by a specific date, and you do not establish that it takes four to six weeks to get to the client, they may sue you for not delivering it in a timely manner, and they might win even though you know exactly how long it takes to ship because you did not specify or set realistic expectations. Setting those realistic expectations will prevent a lot of potential lawsuits, and the more specific, the better.

Keep a Copy of Everything

A lot of client lawsuits are won because the business being sued did not keep a detailed record of the proper documentation. Such a thing is easily avoidable, as it is not difficult to keep an archive. The problem lies in how things are organized and what is deemed important. A lot of business owners unintentionally get rid of vital documents that could have saved them during a lot of client lawsuits. To keep this from happening to you, make sure you keep a copy of every document, no matter how mundane it might seem at the time. Also make sure that you organize everything properly and in an order that makes sense to everyone who has regular access to the files.

You might also want to have a database in case you have to find documents quickly. You never know which document will have the details that you need to win a lawsuit, so none of them should be gotten rid of. The only time you should get rid of documents is if the lawsuit would exceed the statute of limitations, meaning the documentation in question would no longer be needed. If you do not want to keep a paper copy of each record, you can format your database so you can scan the documents instead. Such an option allows you to save space and not have to spend time looking through a lot of filing cabinets and manila folders to find the documents that you need.

Maintain Good Communication

Another thing you can do to significantly reduce the chance of being on the receiving end of a lawsuit is to maintain good communication with your clients. Various delays are unfortunately common, and clients can get impatient when nobody tells them what is going on. However, as long as you maintain communication with them, your clients are likely to be more understanding and not want to sue.

Client lawsuits are a nightmare for both the client and the business. Keep these suggestions in mind so you can avoid the courtroom as much as possible.