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How Litigation Affects a Company or Corporation
Cameron Hawkins • February 14, 2024

Litigation has a widespread ripple effect that can negatively impact all aspects of your business – especially if you’re a small business. Even if you secure a favorable outcome, you’re bound to experience some losses. Although the cost accounting used by many publicly traded businesses makes it difficult to attribute a specific value to the impact of litigation, one Depaul Law Review analysis estimates litigation eats into a significant portion of profits, with some of the largest Fortune 200 companies spending nine figures annually on legal fees and related expenses.

 

Because you can lose even if you win litigation, enacting effective preventative measures to avoid litigation can be essential to protecting your business.

 

Common Causes of Commercial Liability Cases

 

  • Negligence: Failing to uphold the duty of care owed to customers or employees, resulting in harm or injury, constitutes negligence. An example would be litigation stemming from an injury caused by dangerous conditions on your commercial property.



  • Product Liability: Defective products (such as those with inadequate warnings or instructions) that cause injuries could make your business vulnerable to litigation.


  • Breach of Contract: Violating a contract, including a contractor failing to deliver goods or services as promised, may constitute an actionable breach of contract.


  • Professional Malpractice: Negligence or misconduct by your employees or contractors to meet the standard of care expected of them may rise to the level of malpractice. While liability insurance can protect you, you may still incur litigation costs.


  • Employment Practices Liability: Discrimination, harassment or wrongful termination may lead to claims brought by wronged employees.


  • Intentional Torts: This is an umbrella term for intentional and harmful wrongdoing, such as fraud, defamation or interference with business relationships.


  • Cyber Liability: Data breaches, unauthorized access or theft of sensitive information due to inadequate cybersecurity can expose businesses to liability, especially if an employee was responsible via negligence or intentional actions or the business failed to meet regulatory requirements.

  • Fraud and Misrepresentation: Businesses can be held liable if false statements or deceptive representations of facts lead to financial harm.


  • Defamation: Although individuals are usually sued for defamation, some forms of business speech or the speech of employees in a professional capacity can open businesses to liability. Businesses can be the target of defamatory remarks and may bring these claims.


  • Third-Party Liability: Third-party liability means different things depending on the context. In terms of business liability, it often arises in workplace accidents where an employee injured by the actions of another business, contractor or individual sues the responsible third-party in addition to seeking workers’ comp benefits.

 

The Effects of Litigation on Businesses

 

Financial Damage

The extensive costs involved in litigation can have a harmful impact on your business’s bottom line. Even if you have a litigation fund, delays in court can easily cause one case to overrun your budget, bleeding into your other resources. Litigation may also trigger increased insurance premiums for small businesses, especially if you’re found liable in the liability claim.

 

Reputation Damage

Litigation can jeopardize your company’s reputation. Because court proceedings are usually a matter of public record, sensitive information about your company – including your finances – can become available to anyone interested in looking. There’s also a potential for negative press and sensationalized social media backlash, which can harm your brand image and negatively impact your relationships with customers and business partners.

 

Operational Disruption

Going to court involves diverting time and resources away from your business’s day-to-day operations. Employees may be pulled away from their duties to participate in prolonged legal proceedings, which may not only cost you money but hinder productivity, setting back progress and delaying production timelines.

 

Can You Avoid Litigation?

 

There are numerous measures businesses can take to lower their risk of litigation, including regular audits, thorough employee training programs and having contracts reviewed by skilled business litigation attorneys. You can learn more about preventative measures companies can take to avoid litigation in our blog here[1] .

 

That said, there may be situations in which pursuing litigation is still your best (or only) course of action, whether you’re the claimant or the defendant. For instance, in a breach of contract claim, a favorable outcome in court could mean the offending contractor could be ordered to fulfill their contractual obligations in addition to paying you compensation for losses resulting from the delay. In this scenario, litigation or an alternative form of dispute resolution that leads to a settlement may be the only remedies.

 

Whether you’re negotiating, litigating or exploring alternative avenues for dispute resolution, we’re here to help.

 

Have an Experienced Atlanta Business Liability Defense Attorney on Your Side

 

The attorneys at the Law Office of Cameron Hawkins have a record of success representing businesses in a variety of legal settings and will work hard to increase your chances of a favorable outcome. Our team will fight tirelessly for your business, strengthening your case with straightforward evidence and advocating for your interests in negotiations and in court.

 

Schedule a complimentary case consultation with one of our skilled attorneys today by calling (678) 921-4225 or exploring our practice page.

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Employee negligence can have significant consequences for businesses, potentially resulting in costly claims, damage to reputation and operational setbacks. Fortunately, there are effective approaches to discourage employee negligence and handle claims if they do arise.  Employee Negligence and Its Impact on Business Liability Employee negligence occurs when an employee fails to perform their duties with reasonable care, resulting in harm or loss. Examples can range from minor oversights, like forgetting to secure sensitive documents, to severe incidents, such as driving a fleet vehicle while intoxicated or ignoring safety protocols. The implications of employee negligence may include: Financial Loss : Claims stemming from employee negligence can lead to costly legal battles, payouts and increasing insurance premiums. Reputation Damage : High-profile negligence cases can harm a company's public image, leading to a loss of trust among customers, partners and potential hires. Clients or vendors may hesitate to engage with a company perceived as having poor standards or safety protocols. Operational Disruptions : The fallout from a negligence claim can disrupt daily operations, particularly if investigations or legal proceedings demand substantial time and resources from company leaders. Increased Regulatory Scrutiny : Depending on the industry, negligence can invite additional oversight from regulatory bodies, resulting in audits, fines or mandatory corrective actions. Strategies for Preventing Employee Negligence Preventing employee negligence is one of the best ways to defend your business against liability claims. Companies can adopt a proactive approach by implementing policies, training and monitoring mechanisms. Comprehensive Training Programs Employees should undergo regular training that covers core responsibilities, industry regulations and specific job functions. Training should also address general areas like workplace safety, cybersecurity and customer service. In fields with strict safety protocols, like healthcare or construction, scenario-based training is particularly valuable. Clear Policies and Procedures Establishing clear, accessible policies is crucial to setting standards for employee behavior. These documents should outline expected practices, potential consequences for negligence and steps employees can take to prevent errors. Implementing clear procedures not only improves adherence but also provides a reference for employees who might be unsure of the correct action to take in a particular situation. Use of Technology for Monitoring and Accountability Modern technology can play a valuable role in reducing negligence, especially in industries with high-risk activities. Some examples include: Security Monitoring Software : These tools track data access and ensure that employees do not share or mishandle sensitive information. In industries like finance or healthcare, these tools are essential for maintaining compliance and accountability. Automated Task Trackers : For industries with repetitive or procedural work, task trackers can help employees follow through on each required step. These systems improve productivity and reduce the chances of missing critical steps. Establishing a Culture of Responsibility and Accountability Creating a culture where employees feel responsible for their actions and comfortable reporting mistakes encourages vigilance and corrective action. This can be achieved through: Open Communication : Encourage employees to voice concerns and share suggestions for improving workflows. Rewarding Safety-Conscious Behavior : Recognize employees who demonstrate responsibility and attentiveness to reinforce a safety-conscious work environment. Managing Claims Resulting From Employee Negligence Despite preventative measures, claims may arise due to employee negligence. Effectively managing these claims is essential to protect your company from potential damage. Below are some steps for handling claims due to employee negligence. Investigate the Incident Thoroughly An in-depth investigation is crucial for determining the cause of an incident and assessing the validity of the claim. Collect all relevant documentation, including any witness statements, video footage or internal records, to understand what led to the incident. This investigation not only provides clarity but also demonstrates that your company takes such incidents seriously. Notify Insurance Providers Promptly Contact your insurance provider as soon as a claim arises. Timely notification ensures that claims are managed within policy guidelines and increases the likelihood that legal fees and settlements will be covered. Insurance providers can also guide you through the claims process, offering additional support for your response strategy. Develop a Communication Strategy Maintain transparent communication with affected parties, including the claimant, employees involved and any stakeholders. Avoid admitting liability prematurely, as this can weaken your position in negotiations or court. Instead, convey that the incident is under investigation and assure all parties of your commitment to rectifying the issue. Seek Legal Guidance Legal support is critical to managing claims effectively. An experienced attorney can assess the claim, advise on liability issues and represent your company in negotiations or court. An experienced business liability defense lawyer can also help identify and develop potential defenses. Document and Improve Procedures After resolving a negligence claim, review and improve any relevant policies, procedures or training programs to prevent future occurrences. Identifying gaps and making changes not only enhances safety but also reduces the likelihood of future claims. Additionally, demonstrating a commitment to improvement can favorably impact settlements, insurance renewals and regulatory reviews. Contact Our Skilled Atlanta Business Liability Litigation Attorneys Today If your business is facing claims due to employee negligence, The Law Office of Cameron Hawkins is here to help. With extensive experience defending companies against negligence claims, our team will work diligently to protect your business’s financial interests and reputation. Contact us today for a consultation or give us a call at (678) 921-4225.
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