Why Small Businesses Get Sued

November 27, 2019

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As a small business owner, you’re likely more concerned with cash flow, sales, and managing employees than getting sued. However, the reality is that small business owners will face the threat of a lawsuit at least once over the life of their business, and the financial impact can be devastating. 

Business owners who’ve had to pay legal damages say the costs nearly put them out of business. But the effects of litigation can go far beyond crushing financial losses. A lawsuit can harm your business’s reputation, especially if it paints your business in a negative light and if the case is publicized by local or national media. It also can put stress on you and your employees.

This is why we offer business liability insurance. 


Many small business owners treat their employees like family, forging a tight bond over a common goal of growing the business in a way that’s mutually beneficial. However, the occasional unhappy employee—who feels as if their boss has mistreated them—will sue. According to a Hiscox study, nearly one in five small businesses will face employee litigation, which can cost upwards of $125,000 to defend. Of the cases that go to trial, 25% result in a judgment of upwards of a half million dollars.

Employees who feel they are unfairly disciplined or terminated may be tempted to sue for retribution or to recoup any financial loss they suffered due to their employer’s action. Or they may sue because they feel their managers did not adequately address a complaint they reported. Here are six common types of employee lawsuits:

  • Wage and salary violations
  • Workplace harassment or hostile work environments
  • Violation of EEOC federal workplace discrimination laws, including bias against age, disability, religion, gender, retaliation, sexual orientation, pregnancy, etc.; for example, in 2018, the SLS Hotel settled a discrimination lawsuit for $2.5 million
  • Employee injury as a result of employer negligence
  • Wrongful termination
  • Discrimination in violation of the Immigration and Nationality Act (INA)


Likewise, customers may sue for a wide range of reasons—from feeling they did not receive the product or service they were promised, to getting injured on the company’s premises. Even businesses with seemingly transparent and customer-friendly policies get sued. 

General Liability Insurance

protects you for a range of potential claims against your business, such as someone slipping on your property or accusing your business of false advertising. Specialized liability policies can be designed around the unique needs of your business, when necessary.

Keeping you protected.




All Access Insurance in Littleton, CO,  who represents multiple insurance companies as a “Broker” and provides products for auto, home,  commercial, workers compensation, and much more! Call us today for a free quote at (303) 932-1700.