What is negligence and what can it cost your business?
Negligence is when a company fails to take care of the needs of a client, resulting in some form of harm. This could be physical harm, damage to property or financial damage.
Claims of negligence are on the rise and are becoming a growing threat to businesses. If you’re a business owner, here’s what you need to know about negligence and how you can protect your business.
Examples of negligence
Not all failures can be legally defined as negligence. A number of factors must be assessed such as duty, breach, actual cause, proximate cause and damages. A barista spilling hot coffee on someone and causing a burn would be an obvious cause of negligence, as would a mechanic failing to repair a car properly or an orthodontist failing to straighten someone’s teeth.
These are all cases in which mistakes shouldn’t happen. In other cases, clients may be warned of the risk of error or harm, in which case there may not be a case for negligence.
An example of this is someone allergic to nuts getting a reaction to food that is clearly labelled ‘may contain nuts.’ In other cases, the blame may actually lie with another company, such as a delivery company damaging a product in transit.
Certain fields are more prone to negligence claims due to the very nature of the work. There are many examples of medical malpractice such as misdiagnosis or preventable fault during treatment. The risk of physical harm is much greater as a result. Many professionals with advisory roles can also be targets for negligence claims due to helping people make financial decisions.
An investment broker may help someone to make the best investment with their money – if that person then loses money it could be suitable ground for a lawsuit. A building surveyor may similarly warn someone of damage to a property before buying it – if the clients buy the property only to realise that there’s damage that needs fixing, they then may be in their right to sue to the surveyor for not spotting it and preventing them the repair costs.
The financial costs
Negligence claims can cost businesses thousands depending on the nature of the damage. If a taxi driver crashes and causes someone to break their leg, they may ask for a claim that not only covers the cost of medical treatment but the wages they could be missing out on by not being able to go to work. There are then more complex acts of negligence such as leaking out the private financial details of multiple clients. This very breach of security may be enough to warrant a lawsuit of many thousands even if no money was lost as a result.
Insurance can often cover some of the costs if you have it. Those that are uninsured may have to take out a loan to cover costs.
The cost to your reputation
On top of the financial damage caused by lawsuits, there’s also the damage to a company’s reputation as the result of a negligence claim. Lawsuits can often be publicised, if not in local news outlets then certainly on social media. Word can spread and this can tarnish a business’s reputation causing them to lose business.
Preventing negligence in the workplace
There are many ways to fight the threat of negligence.
The first is to raise health and safety standards. A health and safety audit may be in order to help you identify areas of risk to clients that could result in injury and a possible lawsuit. Make sure that you’re signposting all possible dangers, no matter how obvious. Overlooked signposts that can often prevent lawsuits include wet floor signs or even a ‘caution hot’ sign above a tap.
You should also consider security measures. This could prevent the loss of someone’s private details or theft of someone’s property or money. Examples could include upgrading your cybersecurity to prevent hacks or hiring people to look after coats in a cloakroom.
Of course, by far the best way of preventing negligence is to make sure employees are thoroughly trained up when it comes to health and safety and security protocols. On top of training employees in person, it’s useful to have a handbook written up that employees can refer to when unsure of the correct protocol. Also, try to encourage a friendly atmosphere in which your employees feel comfortable communicating their problems to you and your staff. If your employees are afraid to ask questions they’ll be more likely to make mistakes.
It’s important to make sure that you yourself are aware of all the health and safety and security measures that could be implemented to keep a good quality of service. This could involve getting advice from a solicitor or health and safety consultant. Such advice could help you to implement better protocols and prevent errors.
Securing your business against claims
Mistakes will happen even with protocols in place and thorough training. When prevention doesn’t work, the next best line of defence is insurance. By paying small monthly amounts to an insurance scheme, you could prevent yourself from having to make a massive payout in the event of a claim. Professional indemnity insurance is a general scheme that can help protect against many claims in this area.
In certain fields, such an insurance scheme can be compulsory such as in the medical sector (named medical malpractice insurance). In most other fields, such an insurance scheme is optional but worth having. More specialised schemes can help to provide extra security against more specific types of negligence such as product liability insurance and cyber liability insurance.
It’s worth shopping around for professional indemnity insurance as rates can differ amongst providers. You can buy this online or you can get an insurance underwriter to meet you in person and take a risk analysis of your workplace. You can further lower rates by proving that you’ve taken measures to reduce the risk of a claim and by raising your deductible.
Having a solicitor on call is handy for helping to boost your defence in the case of a negligence claim. A solicitor may be able to help argue your case and negotiate terms so that you pay out less as a result.
This should take care of the financial side. Your next step should be to take steps to defend your reputation. This is important if news of the claim makes local headlines or get on social media.
Try to combat this by hiring a PR company that can help to get you in the news for a more positive reason and repair your reputation. You can also hire online marketing companies to manage your online reputation when it comes to social media post and online reviews related to the claim, replying to any negative feedback in a professional and polite manner.