As a business owner, there’s a lot you need to do. You must secure funding to start it, which means you might have to approach a bank or credit union to get a loan. You might attract some investors or borrow money from your family members.
Once your business model and the money are in place, you have to hire employees. You must get insurance and figure out supply chain logistical issues.
By the time your business is fully functional, you’ll probably be very excited. You’ve worked hard for this, and you want it to be successful.
However, sometimes you run into problems. It’s inevitable in the business world. For instance, maybe someone hurts themselves in one of your brick-and-mortar locations, or perhaps they order one of your products, and then it injures them, or they get sick from it.
At that point, your business may face a personal injury lawsuit. You have to conduct yourself carefully here. If you make a wrong move, this individual could bankrupt your business.
Let’s look at different ways a personal injury lawsuit can impact your company and prospects.
You May Have to Pay Punitive and Compensatory Damages
In a personal injury lawsuit, someone may look to collect punitive damages from you. Punitive damages:
- Are sometimes called exemplary damages
- Are assessed to punish a defendant who the court determines acted inappropriately
- Are enforced to keep the defendant from engaging in similar conduct later
A punitive damage cap often exists, but that varies depending on what state you are in and what precisely the plaintiff alleges you did. For instance, in Florida, if your actions were grossly negligent, there’s usually a $500,000 punitive damages cap.
You might also pay three times the total compensatory damages, or whichever amount is greater. Compensatory damages reimburse the defendant for out-of-pocket losses and costs.
You May Have to Take Time Away from Your Business for Court Appearances
You and your lawyer might decide the plaintiff has a strong case against you, and you choose to settle out of court. This significant financial hit might push your business to the breaking point if you’re starting out and you’re operating on a shoestring budget.
If you feel like the plaintiff’s case is not that strong, or they won’t agree to settle:
- You’ll likely have to take time off to appear in court
- You may have to testify to defend yourself
Usually, when you would testify is if you’re trying to establish that you didn’t intentionally do anything wrong. For example, if one of your products hurt the plaintiff, maybe you’re trying to convince the jury that you didn’t know its design was faulty.
The trial might take days, weeks, or even months in some instances. That might hurt your business if you need to appear in court day after day.
Hopefully, your staff can handle things while you’re gone. You might have to promote someone to keep things running smoothly. You might even face a court order to cease all operations until you can resolve the situation.
You May Have to Fire an Employee
Perhaps it was not a product that hurt the plaintiff. Maybe an employee’s actions caused what happened to them.
Maybe the employee wasn’t paying attention, and they ran into the customer and knocked them down. Perhaps they were stocking the shelves, and they dropped something on them.
It could even be that they were mopping the floor, and they failed to put up adequate signage. The customer might have slipped and fallen.
If any of these things happen, you might have to fire the employee or employees who are responsible. You may not want to do it. Firing someone is never fun, but it’s part of your job as a business operator or owner.
If an employee was grossly negligent, though, and they put you in this position, you have little choice but to get rid of them.
You May Have Less Marketing Money
If you do lose the lawsuit, and you have to pay the plaintiff a significant amount, that’s going to hurt the company in several ways. You may have to cut your marketing campaign money.
Perhaps you were going to run a big holiday promotion, and you were going to do a social media blitz. You were going to hire a new social media manager to do that.
Now, that’s no longer possible. You’ll have to run a more modest campaign. You might even have to handle some of the marketing aspects yourself if you can’t afford to hire anyone to do it.
You might also cut back on your business’s hours if you have brick-and-mortar stores. You might have to close some of your locations. You may have to lay off some more employees if you can’t afford their salaries, or you might not be able to give them holiday bonuses or raises.
You May Have to Declare Bankruptcy
The worst-case scenario is that you will have to declare bankruptcy if you lose the lawsuit. Maybe you fought hard against it, but you still lost, and you had to pay a hefty penalty. That might happen if the plaintiff suffered permanent or long-lasting injuries.
Some lawsuits do put companies out of business. You might try to cut corners and scrimp and save in various ways, but in the end, you might not have enough capital left to operate and stay in the black.
Lawsuits are always bad news for business owners, but if you find that someone is bringing one against you, there’s no reason to panic. Hire a reputable lawyer first, and look into the claim they’re bringing against you. Maybe it’s not even valid.
If it is, you can still defend yourself, and you should do so. It might be the only way you can keep your business open.
You probably worked hard to get it off the ground, and even if you or your employees did something wrong, you’re right to defend yourself however you can.