The Most Costly Types of Legal Claims Made Against Businesses

Legal claims made against a business can be very costly, in the time they eat up to be resolved, the damage they do to a business’s reputation, and the financial strain they can place on the bottom line.

It’s important for businesses to be aware of the types of legal claims that are most costly so that they can take steps to prevent them or defend against them if they arise. Take a look at some of the most costly types of legal claims made against businesses.

Product Liability Claims

Product liability claims are one of the most common and expensive types of legal claims made against businesses. Product liability claims arise when a product produced by your business causes injury or damage to a person or property.

The costs of product liability claims can include legal fees, settlements or judgments, and reputational damage. Protecting against these types of injury claims or disputes might include measures like installing quality controls, meeting legal standards for safety and hygiene, and referring to a legal specialist your concerns. To demonstrate how common, and costly they can be – the Consumer Product Safety Commission found that the cost of injuries associated with consumer products in 2019 was over $792 billion, alone.

Intellectual Property Claims

Intellectual property claims are another typical legal claim made against businesses. Intellectual property claims arise when a business is accused of using another company or individual’s trademark, patent, or copyright without permission. This area of law is an interesting one, as fair usage of some media or creative content is completely legal, so long as it is found to be a ‘transformative’ adaptation, for example.

The costs of intellectual property claims can include covering the legal fees of both parties, large settlements or judgments, and naturally, some damage to a business’s reputation found to be plagiarising or stealing another’s ideas.

According to a study by the World Intellectual Property Organization, the cost of intellectual property infringement in 2019 was estimated to be between $180 and $540 billion – these costs can be large if the concept has proven lucrative or successful.

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Employment Practices Claims

Employment Practises claims arise when an employee indicates that they were discriminated against, harassed, or wrongfully terminated in their employment. According to a study by Hiscox, the average cost of an employment practices claim in 2020 was over $270,000.

Employment practices claims have to be defended against by maintaining clear processes around how you employ people, and how you run your business, transparently, fairly, and equitably.

Being aware of the risks that can lead to personal injury claims against your business is crucial, but it doesn’t completely remove the risk of receiving one. Personal injury claims, such as slip and fall accidents, can be costly and damaging to a business’s reputation but also are judged by whether reasonable efforts were made to prevent them, rather than simply whether they’ve happened or not. 

Businesses can and often do face a variety of costly legal claims. Being aware of these risks and taking steps to prevent them can help businesses avoid costly legal battles and protect their reputation.