It is not easy to run a business. Any mistake can lead all your time, efforts, and resources down the drain. Even the biggest companies in the world are not immune to making a mistake that can lead to huge financial losses.
There are many ways businesses can end up going bankrupt. A scandal might trigger an uproar that may result in consumers boycotting your products and services. A brush with the law can force your business to pay massive fines.
Another problem that can make your business go bankrupt is negligence.
Negligence in Business: Why it Happens
When patients go to the hospital to seek immediate medical help, they expect the doctors and nurses to do everything in their power to save their lives. They trust the expertise of medical professionals and, therefore, receive the medications prescribed to them without question.
However, what if there was a mistake down the line and the patient was given the wrong medication meant for another illness? What if the switch up not only unable to address the ailment but caused side effects that endangered the health of the patient?
Incorrect prescription of medication is one of the most common cases of negligence in a hospital setting. When it happens, the hospital can be sued by the patient and their family for the harm caused by the medical practitioner’s incompetence.
All businesses can be accused of negligence. If the client or customer sues, it can cause the business upward of $50,000 in legal fees and other related expenses. If proven to be negligent, and if this negligence has led to harm, the business will be forced to pay the plaintiff thousands to millions of dollars in compensation.
Moreover, it might cause the public to distrust the business which will affect revenue until the case has been cleared and forgotten.
The cost of negligence for businesses is high. In many cases, it can bankrupt a small business.
Insurance Can Save Businesses from Bankruptcy
Just about anything of value can be insured. The same applies to businesses.
Businesses do not have to suffer the consequences of negligence because, although no one wants it to happen, it can happen to anyone at any time. There are different types of insurance that can protect the business from massive financial losses, but one that can help in case of negligence is errors and omissions insurance.
All businesses that offer services to customers can benefit from having E&O insurance. Insurance agents, for example, are especially vulnerable to lawsuits because, when a financial product is unsuccessful, the unhappy client can sue. Even if the client has been made aware of the risks, they may still feel cheated and bring the case to court.
Other professionals such as lawyers, architects, computer technicians, and wedding planners can be sued by an unhappy client.
Depending on the insurance policy the business has chosen, it can cover legal expenses, court-ordered settlements, and damages awarded to the plaintiff. Although it can be costly, it is nothing compared to the money the business can lose from being sued because of negligence.
Avoid Lawsuits
As the old adage says, prevention is better than cure. Avoiding lawsuits should be the priority of the business. There is no way to completely avert mistakes. However, the possibility of committing one, especially one that can cause harm to clients and customers, can be minimized.
First, keep a record of everything. In the event that a customer, unhappy with the service they received, sues, you will have accurate evidence that can be used to defend the business in court. Moreover, it prevents mistakes in the first place.
Creating a profile of each client allows the business to analyze history and customize services depending on needs and preference. For example, a financial advisor can provide a more accurate recommendation based on the lifestyle and behavior of the client. That way, there is a higher chance that the client will achieve their financial goals and be happy with the type of service they received.
More importantly, the business should be honest and ethical at all times. Processes should be within the bounds of the law. Although there is a need to get ahead of the competition and earn more, cheating your way to the top of the market will only place the business at risk of lawsuits. If the clients do not notice the deception first, government agencies will be at your heels. There is no way to recover from a lawsuit caused by wrongdoings.
The goal of every entrepreneur is to earn a profit, expand their business, and improve the lives of their customers. However, when the customer is unhappy or harm has been inflicted on a customer, the business can suffer the consequences. In an instant, every effort, time, and money invested in the business can disappear. By minimizing the possibility of making a mistake and preparing for the worst, bankruptcy can be avoided.