The Importance of Protecting Your Business Against Class Action Lawsuits

Introduction

Class action lawsuits are a fact of life in the U.S. These types of suits can be brought by any party—including individuals and small businesses—and they allow plaintiffs to sue on behalf of a group or class (hence their name) based on an alleged violation of law or regulation. Class action lawsuits can be used to right wrongs through litigation and help protect consumer rights, but they can also pose a significant risk to your business if you're not prepared for them.

In this article, we'll discuss what class actions are and why they matter to your business, how insurance can protect you against them, and what steps you should take if you've been sued for more than your liability insurance caps out at (spoiler alert: there are other ways!).

The Definition of a Class Action

Class actions are a type of lawsuit that can be brought by one or more persons on behalf of themselves and other people who have suffered similar injuries. When this occurs, the court will certify a class action to cover all members of the same group. The named plaintiff(s) in a class action lawsuit is often referred to as the "Class Representative."

In some cases, these lawsuits are used to sue large companies for damages caused by defective products (known as product liability). Class actions may also be used to sue corporations for fraud or misrepresentation, but they're most commonly used in consumer protection cases such as antitrust violations and unfair competition practices. In addition, class actions can also be filed when there is alleged discrimination against employees based on their race or gender—or when a company does not provide adequate safety measures for its employees at work sites that could potentially cause serious injury if an accident were ever to occur there.

Is Your Business Subject to a Class Action Lawsuit?

What is a class action lawsuit? A class action is a type of lawsuit where one person represents many others who have been affected by the same issue. It allows for individuals with similar claims to file their cases in one court and deal with a single judge, rather than each filing an individual claim.

Companies are often targets for these types of lawsuits, but they can also be brought against any type of business or consumer product. For example, if you've purchased an unsafe product and get sick from it, you may want to bring a class action suit against the manufacturer or retailer selling it so that other people aren't harmed as well.

The Danger of Class Actions

Class action lawsuits are an incredibly expensive and time-consuming way for businesses to be sued.

In a class action lawsuit, multiple plaintiffs pool together their claims and file one large suit against the defendant company. By filing as a group, it's much easier for the plaintiffs to find lawyers willing to take on the case because it costs less for them. Also, each individual plaintiff in a class action suit has little power over whether their case will go forward or not; only if enough people sign up does it become financially feasible for a law firm to hire staff members specifically dedicated to this case alone (and we're talking hundreds of thousands of dollars worth of overhead).

Once filed, these cases can take months or even years before they're resolved through trial or settlement negotiations—and during that time companies need legal representation just like any other lawsuit would require. The amount spent on legal fees can be staggering: In 2016 two separate class actions against Apple resulted in settlements totaling $24 million dollars—and that's just the tip of iceberg when it comes down what these suits cost businesses which are targeted by them

Does Insurance Cover Your Business in the Event of a Class Action?

While insurance can provide financial protection in the event a class action lawsuit is brought against your business, it's important to note that there are limits on what an insurer will cover. In many cases, an insurer will have a cap on how much they will pay out for each claim. For example, some policies may only cover up to $1 million in total claims per year. If you exceed this amount and incur additional expenses as a result of being sued by multiple people who have been affected by your product or service (and won't be covered by other sources), chances are you'll have to pay those costs out of pocket. On top of this, some insurers won't necessarily want to foot the bill for small claims either—they might reject them outright if their payout isn't worth the administrative cost involved with processing them (including processing paperwork from law firms).

What If You're Sued for More Than Your Insurance Caps Out At?

As a business owner, you should be asking yourself: how much insurance should I have? The answer to this question is dependent on your business size. If you're operating a small or mid-sized company and only deal in low value transactions (think coffee shops, restaurants), then you'll likely need less coverage than someone who deals in high-value transactions (think car dealerships).

The amount of insurance is also determined by the type of lawsuit that may come against your business. For example, if there's an issue with food quality or faulty products—which class action lawsuits are often concerned with—then it's important to know that your general liability policy will not protect against these types of claims. Therefore, it's important to investigate what kind of protection is available before deciding on an amount of coverage.

Managing Liability Risk

Liability insurance is a type of business insurance that covers damages caused by your business. The main function of liability coverage is to indemnify you against unexpected events, such as lawsuits due to faulty products or injuries caused on the job. Liability insurance can also come with other types of coverage for professional services and property damage, including:

• Business umbrella coverage: This protects you from large liabilities that could put your company out of business if they were uncovered. For example, if someone slips on ice in front of your store, then breaks their leg and gets sued for $1 million dollars—that's the kind of event that this policy would help cover.
• Product liability: If you sell products to customers (like food at a restaurant), then having product liability insurance is necessary when something goes wrong with those items and causes harm or loss to others who use them. For example, if someone gets sick after eating at one of your restaurants because there was bacteria in their meal—this type of policy will protect you from lawsuits over such incidents by paying out costs associated with defending yourself against legal action brought by victims or their families should it become necessary down the road during litigation process.

You can protect your business from class action lawsuits with insurance and other tools.

A class action is a type of lawsuit in which one or more plaintiffs bring a single suit against the defendant(s). In other words, the lawsuit alleges that all the members of the class have been wronged by the same actions. The plaintiff can be an individual person or entity like a business, but it must be able to prove that there are others who were similarly affected by this wrongdoing.

Class actions allow for greater leverage in lawsuits because they allow multiple plaintiffs to share costs and risks as long as all parties agree to participate. If any individual member does not wish to participate in the suit, then their claim will no longer be part of it. This makes filing and defending against class action lawsuits much more complicated than regular suits.

Conclusion

In conclusion, class action lawsuits can be costly to your business. The best way to protect yourself is by having the right type of insurance and other tools in place. If that’s not enough, you can also consider hiring an attorney who specializes in class actions so they can help defend against these types of cases.