California is a litigious landscape; it is one of the most heavily regulated and litigious states in the country. Businesses both small and large face a complex web of employment laws, consumer protection statutes, environmental regulations, and contractual obligations – most of which come with heavy-handed penalties for non-compliance. In this environment, the best defense is a robust offense. Businesses that invest internally in thoughtful structuring, clear internal protocols, and regular legal check-ins position themselves well to avoid litigation altogether or, at the very least, to withstand it. Facing litigation can be a reality in today’s world of catchy headlines of big-time judgments, so it is important to follow some time-tested rules to best arm your business if the day comes where it needs to defend itself.
First Rule of Litigation: Documentation – It will not be surprising to learn the best way to protect your business against what feels like inevitable litigation, is documentation. Whether it is your time clock entries, communications with vendors or clients, clear, written documentation that complies with California law creates a record that can make or break a defense. If you do have something like an employment handbook, do not rest on the laurels of that accomplishment. Have it reviewed regularly to be sure it reflects compliance with current legal standards. Doing so means you close common loopholes that billboard and bus stop plaintiff attorneys are familiar with exploiting.
Second Rule of Litigation: Have Legal Counsel Before You Need It – Successful businesses, or businesses that last, do not wait for a someone to file a lawsuit before looking for legal counsel. Once service of a complaint takes place, the clock on your time to respond starts; each day spent trying to find competent counsel ticks away precious days that should be spent analyzing and strategizing the best defense. Stalwart businesses foster an ongoing relationship with attorneys who understand their individualized business model, pressures facing their specific industry, and comfort level with risk tolerance. Consulting with counsel on an ongoing basis ensures day-to-day decision making runs as smoothly as possible and allows for candid conversations about liability exposure. Additionally, business owners with counsel already on board save themselves the apprehension if a lawsuit ever arises.
Third Rule of Litigation: Insurance Coverage – Make sure you have the insurance coverage you think you do before an employee, client, or party to a contract files suit. Too often, businesses under-insure or do not have coverage for conduct they think they do. Reviewing your commercial general liability policy, employment practices liability insurance, cyber insurance, and directors and officers coverage with your attorney or your insurance broker helps ensure your coverage is aligned with the actual risk profile of your business. For example, many contractors find out after the fact their policy does not cover claims of poor workmanship; once litigation is filed, it is too late to rectify that problem. Having proper insurance coverage to start with makes it easier to tender a defense quickly and get an insurance company to participate in the litigation on your behalf, when required to do so.
Taking proactive steps to protect your business from litigation in California is not just smart – it is essential. By maintaining documentation, engaging legal counsel before disputes arrive, and ensuring your insurance coverage aligns with your risk profile, you can significantly reduce exposure and respond more effectively if a claim is made. A little preparation today can save your business time, money, and stress down the road.
