Please ensure Javascript is enabled for purposes of website accessibility

The Liability Risks Small Businesses May Face

As a small business owner, it’s important to be aware of the risks you face when it comes to liability. These risks can come in many different forms and can vary depending on your type of business. Knowing what these risks are and how to best manage them is essential for running a successful business. Let’s explore what liability risks you might face as a small business and how you can protect yourself.

Employment Law Risks
The most common risk that small businesses face is employment law-related issues. This includes things like wage disputes, discrimination claims, and wrongful termination suits. To minimize your risk here, make sure you have a clear employee manual outlining company policies and procedures, as well as properly document all employee disciplinary action taken. Additionally, regular training on relevant laws and HR practices will help keep your team up-to-date on current regulations so they know their rights and responsibilities while avoiding potential pitfalls.

From a coverage perspective, having Employment Practices Liability Insurance (EPLI) may protect you if one of these issues results in a lawsuit against your business.

Operational Risks
Operational risks refer to the day-to-day activities of running a business such as customer service, marketing campaigns, data security measures, etc., which can all lead to potential liabilities if not managed properly. Implementing proper protocols for dealing with customer inquiries, setting up secure systems for storing customer data, and making sure you’re compliant with relevant laws are all key steps to mitigating operational risks related to your small business operations.

Your operations may require multiple coverages to help protect against these operational risks. A General Liability (GL) policy may cover some of them, while standalone policies like Cyber Insurance may help insure you have higher limits of coverage based on your needs.

Commercial Property Liability
Property damage is another common source of liability for small businesses. If a customer is injured on your premises due to an unsafe condition that wasn’t addressed properly or quickly enough by you or your staff members, they may be able to sue for damages depending on the severity of their injury and how much responsibility lies on your shoulders as the property owner or manager. To lessen this risk as much as possible, make sure all safety regulations are followed and that regular maintenance checks are carried out on a regular basis. If there is ever an incident involving property damage caused by someone other than yourself (e.g., an employee), investigate immediately and take appropriate action if necessary so that you don’t end up liable for damages caused by another person’s negligence or wrongdoing.

Again, a GL policy may be all you need here, but your policy limits are always something to consider based on your level of risk.

Product Liability Risks
If you manufacture or sell products, then product liability should also be top-of-mind for you when it comes to managing risk. This means understanding the potential dangers associated with your product or service and making sure that customers are adequately informed of any safety warnings or instructions prior to use. Having a comprehensive warranty program in place can also help reduce product liability risk as well as provide an additional layer of protection against customer complaints or lawsuits over faulty products or services.

Separate Product Liability insurance may also be available for your business, and may be needed if you have a higher level of risk based on what product(s) you produce.

No matter what type of small business you own or operate, there are always liability risks associated with it that need to be managed properly in order to ensure smooth operation and avoid potential legal complications down the road. To help ensure you have that right coverages in place to respond to legal concerns, contact Brandon Patterson in our agency at 865.453.1414 or email to get started!