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Controlling the Risk Factors in Litigation

April 13, 2006

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The civil litigation system itself represents a significant risk factor to the small business owner, because it makes it more likely that a lawsuit will be filed and that significant damages will be awarded to the plaintiff. However, by understanding these risk factors and then by controlling them, the small business owner can significantly reduce overall exposure to liability.

What follows are the significant opportunities available to the small business owner to control these factors and, thus, reduce exposure to day-to-day liability risks and maximize asset protection planning:

• elect mediation and arbitration
• file in small claims court
• make the loser pay
• seek punitive damages
• file a counterclaim
• plan for pre-trial discovery
• use choice of law clauses
• consider exculpatory clauses
• enact disclaimers
• enlist state or federal government assistance
• apply leverage
• choose liability insurance effectively
• engage in asset protection planning

Certain strategies primarily benefit small business owners who may be defendants in litigation or the targets of a claim. Other strategies primarily benefit small business owners who are plaintiffs or have a claim against another party. However, most strategies benefit small business owners in either capacity.

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