Small Businesses and Frivolous Lawsuits

There is a misconception that frivolous lawsuits only involve poor/middle class citizens against large corporations. However, very small businesses are frequently victims. In Washington DC, a dry cleaner store that was owned by Jin and Soo Chung were sued by a customer for 54 million dollars over pants they temporarily misplaced. In Charleston West Virginia, a woman sued a bar after a drunken patron fell on her and knocked out her teeth. In Rockville Maryland, a woman sued a small pool maintenance business because she fell on the store’s sidewalk and suffered injuries after a male goose snapped at her. In Tennessee, a woman sued McDonald’s and Uncle Koto Liquor Store (small business) after she said she was beaten by a homeless man after giving him a cheeseburger outside a Nashville McDonald's.

Although affluent companies have deeper pockets than small businesses, affluent companies are the institutions who most likely can afford legal protection against frivolous lawsuits that often cost more than $100,000 in legal fees. Small business owners often struggle to pay for legal defense that cost $5,000 or more. This is why small businesses are more financially devastated by lawsuits than large corporations.

To learn more about how lawsuit abuse effects small businesses, go to:

http://www.facesoflawsuitabuse.org/

Limited Liability Insurance and Overconfidence

Business owners who have liability insurance with limited coverage often have overconfidence when they are threatened with a lawsuit. Suppose an owner of a laundry mat has coverage that insure 1 million dollars if he/she is defeated in a in a lawsuit. An opportunist threatens to file a frivolous lawsuit against him/her. The owner assumes that if the money hungry opportunist sues, he will not sue for more than 1 million dollars. He says to himself, "My assets will be protected, so go ahead and sue me." The opportunist threatens to file a frivolous lawsuit against the owner. The owner calls the opportunist's bluff, but he sues the owner for 2 million dollars. If the defendant loses, he will have to pay 2 million dollars not to mention the legal fees of trial defense that is often thousands of dollars. Someone having a greater peace of mind due to this type of liability insurance is one thing. Having overconfidence can be financially dangerous.