Frivolous Consumer Lawsuits

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					Avoiding Frivolous Lawsuits
By: Tina Dettman-Bielefeldt

It all started at Custom Cleaners, a neighborhood dry cleaner in Washington, D.C. The
Chung family, owner of the shop, was proud of their work and posted a sign that
advertised “Satisfaction Guaranteed.” At the time, they could have never guessed that
that sign would become the cause of international attention and a $54 million lawsuit.

The Chungs had a regular customer, Judge Roy Pearson, who brought in a pair of pants to
be cleaned. When he returned for the pants, the Chungs couldn’t find them and the judge
became dissatisfied. Despite being offered up to $12,000 for the pants, the judge held to
his claim that he was entitled to damages under the city’s consumer protection law as
well as damages for inconvenience, mental anguish, and attorney’s fees for representing
himself.

Although the case was rejected by Judge Judith Barnoff in June and the Chungs were not
found in violation, they were still stuck with a bill of about $100,000 in legal fees to
defend the case. The Chungs may sue Pearson to recover the fees, but in the meantime,
they have incurred costs that jeopardize their ability to stay in business.

Even as the media had a field day joking about the case, it provokes real concern for
small business owners. How can a business defend itself against such claims?

Jeff Bergum, a SCORE counselor and agent at Bayland Insurance, said that insurance is
important. If the dry cleaner had obtained an insurance endorsement to cover damage or
loss to people’s property that is on the insured’s premise, at least part of the claim would
have been covered. However, the so-called “Bailey’s Coverage,” would have probably
been limited to $25,000 or $50,000 and wouldn’t have come close to covering the kind of
damages the judge was seeking.

Large lawsuits for damages more often occur over the end use of products or services.
These claims are defended through “Products and Completed Operations Coverage.” The
amount of coverage is determined by working with your insurance agent to determine the
possible extent of your liability. In any case, Bergum said that he doesn’t write policies
for less than $1 million per incident or $2 million aggregate. An umbrella policy is often
added to insure losses over that amount. This coverage will insure not only the amount
of the claim, but also the cost to defend it up to the limit of the policy.
These high amounts recognize that we have become a very litigious society, and
businesses need to protect themselves as much as possible. There are practical things that
can be done, as well.

“Look carefully at any signs you have posted. Read over everything that you claim to be
true and look for any word or statement that could be a potential issue,” Bergum advised.
“You need to be sure, as much as you can be, that nothing that is stated will open you up
to litigation.”

Bergum further recommends the use of “disclaimers” on store signs, flyers, or other
information. On the “Satisfaction Guaranteed” sign for example, the dry cleaner might
have added a statement like, “Guarantee good for up to the cost of the garment.”

Do the best you can to avoid litigation, but be aware that customers are not always
logical. “You need to be cautious, but at the same time understand that you can bend
over backwards for some clients and never satisfy them,” Bergum noted. “However, if
you watch what you claim and make sure you have adequate insurance, you’ve taken the
appropriate steps to minimize risk.”

If you’d like further information, contact the Green Bay Chapter of SCORE “Counselors
to America’s Small Business,” Visit www.greenbayscore.org or call Cindy Gokey at 920-
496-8930 for information on counseling, resources and upcoming workshops.

Tina Dettman-Bielefeldt is co-owner of DB Commercial Real Estate in Green Bay and
Chapter Chairman for the Green Bay SCORE group.

				
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