5 Simple Tips to Reduce Liability Claims
Lawsuits are an unfortunate part of doing business in America, and one that can be costly for a small business to absorb. According to a report issued by the Court Statistics Project, the average breach of contract case costs $91,000. While that number may be small potatoes for a multi-million dollar company, for a small IT business, it could be a huge financial hit.
While technology insurance policies like General Liability Insurance, Professional Liability Insurance, and Cyber Liability Insurance can help pay for costs associated with a lawsuit, your best bet is to avoid them in the first place. Here are five simple tips to help head lawsuits off at the pass and thwart liability.
Tip #1: Set Reasonable Expectations
Starting a new project can be exciting, but try not to get carried away and agree to unworkable timelines. Be realistic with clients and try to err on the side of under-promising and over-delivering.
Brian Dusek (@brianjdusek),
McCullough, Campbell & Lane LLP
advises finding out exactly what your expected duties are, “contractual or otherwise.” He recommends making sure…
- You are completing your tasks to the best of your ability.
- The client’s the expectations are clear.
“If their expectations are something beyond the scope of your ability, that could be a recipe for disaster, especially if you start dipping a toe into areas you don’t really know,” Dusek says.
Tip #2: Get in in Writing
Don’t trust any business dealings to a handshake. Write. It. Down. It can save both you and your client grief down the road. When drawing up a contract, be sure to:
- Be specific. “In the work agreement, we try to spell out in as clear detail as possible using simple English what we plan on delivering and, if we feel it’s necessary, what we don’t plan on delivering,” says
Rich Brooks (@therichbrooks),
president of web design and internet marketing company
Flyte New Media
- Communicate expenses clearly. (@callthatgirl),
Microsoft Outlook expert and founder of
Call That Girl,
makes it a point to communicate right away with clients if it looks like a job will exceed her initial quote. “A lot of times the sticker shock is what makes people unhappy,” she says. “If you say here’s a soft and low quote, then they’re kind of aware that a tech job can go in a different direction.”
- Consult a lawyer.
Nina Kaufman (@NinaKaufman),
business attorney and strategist at
Ask the Business Lawyer,
recommends staying clear of one-size-fits-all contracts you can pull from online. “I encourage business owners to use them for research, so that you can see what other companies have done,” she says, “but always have something looked over by trained eyes” if you’re using it for official business.
Tip #3: Make Clients Sign Off on Any Requested Changes
Make it clear to clients that if they want any changes after the initial contract is signed, or after certain approvals have been given, they need to do so in writing. That way if they later try to claim you are behind schedule, you have a signed document from them requesting the changes that led to that missed deadline.
Consider that a client may base their dealings with you on a previous experience with another IT professional. They might not understand that you handle changes in a different way. When there are changes, especially ones that affect the cost of your services, thoroughly review these requests with your clients.
Brooks says when his company builds a website for a client, they have signoffs along the way and explain as clearly as possible “what the ramifications are for changing their mind after they’ve approved something.”
Tip #4: Have another Set of Eyes Proof Everything
Despite your professional diligence, it is next to impossible to proof your own work. You know what you meant to write, but what you see on the screen may compete with the version in your head – making you blind to the error. (Wired devoted an entire article to why we struggle to catch our own typos, if you’re curious to learn more.)
If you have employees, implement quality control by taking turns proofing each other’s work before a project is ready to launch. Or as Dusek explains, “Prevention is always easier than dealing with the aftermath.”
If you are a true solopreneur, set a project aside when you finish it and proof it the next day with fresh eyes.
Tip #5: Make Sure Your Contractors are Insured
Depending on the type of work your business does, you might want to consider making sure any subcontractors you hire have Professional Liability Insurance. That way, if something goes wrong with the contractor’s work, the liability should fall on them, not your business.
“We occasionally work with subcontractors,” says
Dave Ketterer (@d_ketterer),
C.D.’s IT Consulting.
“They would have to have their own insurance.”
To learn more about how liability insurance can protect your business, check out “How General Liability Insurance Can Help with Frivolous Lawsuits” and “How Professional Liability Insurance Can Help You Fight a Lawsuit.”