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Risk Ahead sign from www.swpremierins.comYour business insurance could be the only thing between staying in business or going out of business if a claim arises out of the course of your business. Even frivolous lawsuits could cause you to close your doors if you are negligent about your business insurance. Let me explain.

Lawsuits happen all too frequently in our society so it's up to you, the business owner, to ensure you have the right insurance at all times. Even the cost to defend yourself and business in a frivolous suit can wipe your business out. Since negligence is the most common reason for a suit or claim it's important to understand what it is and the four elements of negligence that must exist.

Merriam-Webster says Negligence is the failure to exercise the care that a reasonably prudent person would exercise in like circumstances.

So, understanding this definition, how should you measure the risks you face in your business?  As a prudent person would and to elements of negligence.

The View of Negligence

  1. Under the Prudent person concept
  2. Elements of Negligence - these all must exist
    • A legal duty owed - conformity to a certain standard of care owed by the defendant to the plaintiff
    • Breach of this legal duty owed - the defendant failed to conform to this certain standard of care
    • Causal connection - must have the existence of a reasonably close causal connection between the defendant's conduct and the resulting injury or harm to the plaintiff
    • Actual loss or damages - the plaintiff must suffer actual loss or damage

Take a fresh look around your business with this view of negligence. Don't use your eyes but the eyes that a prudent person would use. Think about the legal duty you owe and any potential breach that could happen while walking around your premises. Have your employees do the same thing. They may see something you don't. Make sure your policies and procedures for handling situations such as spills are adhered to each and every time. Ensure that your signage, safety items, etc are accurate and in working order.

To conclude, take some time with your insurance professional to walk your premises. Identify areas of opportunity that can be improved or enhanced so that you can lesson the potential for a lawsuit, frivolous or not. And remember, the cost to defend yourself in a lawsuit can be extraordinary so seek out the right insurance for your business risk at the appropriate limits. Being under-insured could mean going out of business forever.

Author Richard Morris

Richard Morris, an independent insurance agent in Chandler, Arizona, has been serving and helping Arizona families and businesses with all their insurance needs for over 23 years. Visit his website at to see all the ways he can help you with your insurance needs or call the office at (480) 336-2707 or toll free at (888) 907-9349. Connect with Rich on Google+ and Twitter.

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