Definition: Anything for which a company is legally bound or obligated, as to
make good any loss or damage that occurs in a transaction
More than 80 million lawsuits are filed in U.S. courts annually.
That doesn't mean your business will be the target of one, but it
does suggest the need to evaluate your business's legal
liability.
As your business grows, you should occasionally reassess your
exposure to liability claims. Growing companies naturally become
more exposed to various kinds of risks. For instance, liability
claims resulting from employment, such as charges of discrimination
or wrongful termination, tend to increase as your work force grows.
Following are some of the major areas of liability exposure you
should evaluate from year to year:
- Employment. The larger and more diverse your work force,
and the more turnover you have, the greater your exposure to
employment-related liability lawsuits will be.
- Accidents and injuries on your premises. If a delivery
person trips on your steps and breaks a leg, you may be sued for
medical and other costs.
- Vehicle-related liability. If an employee driving a
company car gets in an accident, the company could be held liable
for damages and injuries.
- Product-related liability. If you manufacture any type
of product, you may be liable for injuries or accidents resulting
from poor workmanship or labeling.
- Errors and omissions liability. You may be sued for
damages resulting from a mistake in the work your company does if,
for instance, you accidentally delete a customer's important
computer file.
- Directors and officers liability. If you have a board of
directors, they may be held personally liable for actions taken by
the company.
When it comes to liability, every company is different. For
instance, a restaurant that uses hot-oil fryers may be considered a
different liability risk by an insurance company than one that
bakes its food in ovens. By giving your business a legal checkup,
you'll decrease the chances of your particular liability proving to
be a disastrous weakness.