Avoiding the High Cost of a Personal Injury Tort

In 1992, Stella Liebeck, a geriatric fan of McDonald's coffee, sat a scalding hot cup of the stuff between her legs before spilling it and burning herself. The resulting litigation and 1994 original judgment award of $2.86 million dollars (eventually reduced) gained national attention and took the issue of personal injury lawsuits and firmly rocketed it down, then off, the proverbial slippery slope.

Whether you consider them tools for the common man to find justice against corporate offenders or just a way for some slightly begrudged plaintiff to gain financial independence through litigation, twenty one years later, personal injury lawsuits are now a common financial issue for business. Working to stamp out egregious behavior is a positive step, but not an absolute defense -- suits can arise from intentional behavior, accidental negligence, or simply selling or using a faulty product (thanks McPherson v. Buick!). No matter what the cause, a suit decided in favor of the plaintiff -- and more commonly, settlements in lieu of legal proceedings -- cut a chunk of a company's bottom line.

So how can you prep your company for a judgment of this sort? Note: this information is not, and should not be construed as, legal advice. 

Liability Insurance - An effective and well-written insurance policy can protect against and pay out in the event of a judgment for a negligent act. These policies do not, as a matter of law, protect against intentional torts, which typically double as crimes against the person (trespass, assualt, etc.). As you do with any financial category, it's best to monitor these civil judgments to determine trends, and react accordingly. If you conduct business in a state that's seen an 18% rise in the judgments awarded by jurors, adjust your policies accordingly.

Additionally, these type policies typically give the insurer some insight into how these type tort cases are handled in court. They may prefer to prematurely settle due to the anticipated cost of going to court. Repeated settlements, or settlements of any kind, can negatively impact your premium payments. Like any other business product, your liability insurance can be sourced and best values can be located with these factors in mind.

Emergency Fund - While you shouldn't preemptively establish a fund for the eventual payout of personal injury judgments -- unless you're hiring every arsonist gardener and narcoleptic delivery driver in town -- every organization needs some sort of emergency fund in addition to their insurance coverage.

Lock Down Variables - The best defense is a good offense. Like we've established above, you can't prevent everything, but you can lock down loose ends. Security systems outfitted with cameras can provide valuable information and alert you not only to potential fraud but to troublesome problems that can be corrected. Monitoring devices in vehicles can slim down logistics costs and also provide excellent data in the event a driver is accused of a negligent act.

A personal injury judgment can cause significant harm to an unprepared business. While preparation will keep you from losing everything from an act of negligence, make sure you don't lose your shirt in the preparation costs.