Litigation and Insurance

1. Being Sued

If your business does anything that causes loss or damage to someone, it can be sued.

1.1 Contractual disputes are the main cause of litigation.

• You may refuse to pay for goods or services, perhaps because they were late or faulty, but the supplier sues for payment. For example Landlord and tenant disputes. The tenant withholds rent (eg until the premises have been properly maintained) and the landlord sues.
• You may breach a contract by failing to supply goods or services on time or as agreed, and the customer sues.

1.2 Employment disputes are another major cause of litigation.

• Wrongful and unfair dismissal are the most common types of claim, followed by sexual and racial discrimination.
• Injury claims can vary from burns and broken bones to complaints such as repetitive strain injury.

1.3 Public liability and product liability claims are most likely to arise when:

• A member of the public suffers an injury while on your premises, an injury caused by goods you have supplied, or financial loss as a result of any negligent advice you give. 'The public' includes everybody except your employees.
• You supply faulty goods or a poor service.

1.4 Shareholders and investors can sue you for breach of 'fiduciary duty'.

• The Companies Acts put a wide range of responsibilities on directors. They include more than 200 offences for which a director can be held personally liable. The personal liabilities of a director are unlimited, whereas your company has limited liability.
• Typically, directors are jointly liable, so you could be sued personally for the losses resulting from the actions of another director.

1.5 The Official Receiver and liquidators have an opportunity to review all the transactions of a business which has ceased to trade (on behalf of the creditors).

• If there is any evidence of wrongdoing, you, as a company director, could be sued personally.