How a Professional Liability Claim Can Affect a Business

While you might not think anything will happen to your business, it’s always good to be prepared in advance for a potential professional liability insurance claim. You can’t say that there will never be a legal dispute with your company, so all that can be done is prepare for a situation. Lawsuits are both long and grueling—and worse, costly. Legal woes could cost anywhere from $270,000 for a lawsuit, American Express found. That kind of money is enough to cripple a company, and then some.

That’s just the tip of the iceberg; some lawsuits can reach up to $1 million or more, according to The Huffington Post. What do you do when you are hit with a lawsuit? It’s not just monetary issues that you have to handle; there’s fallout that the business will have to deal with as well. This is when professional liability insurance is a necessary coverage to have. Here’s a look at how a professional liability claim can affect your business.


The costs that incur because of litigation are hefty, to say the least. The United States Small Business Administration found that litigation is both costly in time and money for small business owners. It not only modifies the way the business is ran, but it also causes emotional hardship within small firms. Your whole business can come to a grinding halt when a lawsuit is involved.

Paying for your defense will end up costing tens of thousands of dollars at the least, and this isn’t counting what you pay if you end up losing the court fight as well. And those payments will last for quite some time. After taking such a loss, it’s only natural that a business would want to recoup their losses, but cutting costs is also going to severely cut down the productivity of your company. This means it’s going to take even longer to rebuild your business back to where it was before. This is the vicious cycle that becomes the end of many small or even mid-sized businesses.

Other Side Effects

The thing that matters the most to your business is also going to be damaged: your reputation. Just being involved in a lawsuit at all often scares customers or clients away. This is a given and there’s no way to deflect that. People don’t want to be associated with anything that looks like trouble. Once people find out about the lawsuit, it’s going to impact your existing customer base as well as new coming customers. Patrons that look up your business online might be met with news of your lawsuit, which in turn will prevent them from doing business with you. While professional liability insurance can’t protect your reputation, it can protect a portion of your costs. Make sure you’re protected against litigation.


About Axis Insurance

At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.

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