The following excerpt is from Chapter 9 of my handbook, Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits:

The sale of goods and services is regulated by, among other things, the Uniform Commercial Code (hereinafter, the U.C.C.), a version of which is adopted by most states and reviewing it should help the business owner (the seller) understand what is expected of his or her business.  The U.C.C. delineates four types of warranties, which are as follow:  (1) warranty of title, (2) implied warranty of merchantability, (3) implied warranty of fitness for a particular purpose, and (4) express warranties.  A brief description of each and the applicability of the warranty to your business is discussed below.

Essentially, a warranty of title warrants that you, the seller, have title to a product that you’re selling and that there are no liens on the product, which the buyer is unaware of at the time of purchase.  Meaning, don’t sell stolen or pirated goods.

There are six technical elements to the implied warranty of merchantability.  I am not going to spell out each of the elements.  One element is most important and is most often the basis of a claim in a merchantability suit, i.e., whether the goods being sold are “fit for the ordinary purposes for which such goods are sold.”  U.C.C.  Here is the important part for the seller to remember:  it makes no difference whether you knew of the defect.  If the product is defective, in many cases, you are liable.

Implied warranty of fitness for a particular purpose arises when a seller knows the particular purpose for which goods being sold are going to be used and the buyer is relying on the seller’s judgment to select suitable goods.

Any promise, statement, description, or sample made by the seller, which the buyer could have relied upon when entering the contract, creates an express warranty.  Some courts recognize certain exceptions including the personal opinions of the seller and certain statements relating to the value of the goods being sold.

Disclaimers of warranties may help the seller avoid some liability, however, the U.C.C. indicates that “negotiation of such warranties is inoperative to the extent that such a construction is unreasonable.”

Essentially, the seller may attempt to disclaim certain warranties, but be careful, because your disclaimers may not always be valid.  A few examples of situations where warranties may successfully be disclaimed are:  by inspection, or refusal to inspect, i.e., when a buyer purchasing something from the seller inspects the goods carefully and purchases anyway, or has the opportunity to inspect, but refuses.

Additionally, a seller may disclaim certain warranties (including merchantability and fitness for a particular purpose) by conspicuous writing, which indicates that the seller is disclaiming the particular warranty.  However, whether the warranty was in fact disclaimed, as in all disclaimer situations may ultimately be determined by a court.  As such, I would urge you to avoid considering attempts to circumvent warranties by way of disclaimers.

Related Blogs

• Related Blogs on Chapter 9; Warranties, Breach of Warranty Actions and Disclaimers
• Auto Insurance

Chapter 7 of my journal, Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits, which deals with insurance coverage, begins with the next paragraph.  The Introduction, plus the previous six chapters are covered in older blogs.

Just a word or two on insurance coverage.  It’s very important that your business have coverage that protects itself.  By protect, I really mean to defend and indemnify.  Defense of your business by your insurer is not optional.  If you have coverage for the type of loss which occurs, the carrier has a duty to defend their insured.  Defense means to handle the claim for you from start to finish.  If the carrier deems the claim to have merit and value, the claim may be settled by an insurance adjuster prior to the filing of a lawsuit by the plaintiff.  If a lawsuit is filed, the insurance company will be responsible for providing an attorney to file an answer to the plaintiff’s complaint, and handle all the litigation related matters through final resolution of the case.  The cost for a business to pay for it’s legal defense without insurance coverage would likely put the vast majority of small businesses out of business.  Therefore, be sure to have appropriate coverage.  To keep the cost down, consider a higher deductible (but one you can afford if the need arises).

You may also wish to consider purchasing medical payment coverage (med-pay).  Such coverage will pay the medical expenses of someone injured on your property, usually up to $1,000.00.  The coverage does not typically extend to employees, as in theory they have worker’s compensation coverage available.  The cost of such coverage is typically fairly nominal and it often placates claimants just enough to prevent them from hiring an attorney and pursuing the matter further.  Often, if the claimants get their medical expenses paid by the establishment that they feel was responsible for their injuries, they feel as if justice was served.

Finally, look into buying an umbrella policy.  These types of policies protect the insured from claims of negligence, as well as other claims, usually up to $1,000,000.00, which is likely to exceed other coverage that you have.  The cost of this type of policy is usually only a few hundred dollars annually.  Just be sure the coverage kicks in for claims against your business.  However, even if it doesn’t, you should consider the coverage, as it protects you personally in case a lawsuit against your business pierces the corporate veil.

Chapter 5 of my manual entitled Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits deals with miscellaneous tort claims and reads as follows:

I cannot stress enough how important it is for you to inspect the premises of your business; not just to check off a report, but I mean inspect with a very critical eye.  While looking around your business, keep in mind that almost anything can be a hazard.  Some examples of miscellaneous claims that I have had experience with should help illustrate my point.

When you look around your store, inside or outside, how is the lighting?  Are you able to see the display cases?  Is it reasonably foreseeable that a business invitee might bump into it?  Whether the premises are properly lit is subjective.  But there are things that you can do to help protect yourself.  Make sure the highest wattage bulbs are used and that the light fixtures themselves are spaced close together.  If someone falls because they trip over something they didn’t see, rest assured that an experienced personal injury attorney will get a lighting expert out to your store pronto to check for proper wattage and the location of lights.

Another claim that I have handled which pertains to a lot of businesses is injury due to a puncture by those inventory control devices that you usually see attached to clothing.  When they are removed by the clerk ringing up the sale, be certain that there are solid procedures in place for what should be done with that sharp pin which is left uncapped.  Think about it, that pin is a claim waiting to happen.  If the patron is injured, there’s a negligence claim.  If an employee is injured is injured, there’s a worker’s compensation claim (see Chapter 6).

Related Blogs

• Related Blogs on Chapter 5: Miscellaneous Tort Claims

The following excerpt is from Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits, a guide authored by attorney Roger K. Gelb.  Chapter 3 reads as follows:

If one of your employee’s injures one of your invitees, is the business liable?  The answer is sometimes.  In general, if your employee intentionally injures an invitee then, unless there was reason to know that the employee would act that way (history that you, the employer, were aware of or should have been aware of), the store probably is not liable for the employee’s intentional actions.  Beyond that, the store’s insurance coverage probably will not cover the loss.

Whether you actually know of an employee’s violent tendencies is the easy part, but in what cases should you have been aware of the employee’s violent propensities?  Watch out for obvious red flags, such as a bad temper that the employee flashes in front of you and others.  And if that temper combines with violence, and there are witnesses, your business may be on the hook if the employee injures and invitee.

An employee handbook that is provided to every employee may be a good idea.  The handbook should cover many subjects, including:  appropriate dress for the workplace, how to interact with fellow-employees (including supervisors and subordinates) and customers, what type of behavior is appropriate in the workplace, vacation time, sick leave and other topics which may be unique to your business.  Be sure to obtain a signature from the employee confirming that they have received  the handbook and will read it and obey the rules.

The employee handbook is different from a contract of employment, which I would urge that you not provide.  A contract of employment, while it may cement your agreement with your employees as far as pay and benefits go, it will also no doubt cover termination.  In most cases, such agreements only provide unnecessary restrictions on the employer as to when and how an employee may be fired.  Typically, absent such an agreement, an employee is considered an “employee at will” and may be terminated for almost any reason.  Naturally, most jurisdictions have laws in place that ensure that the reasons for the termination are not based on race, religion, sexual orientation, etc.

What if your employee negligently injures one of your customers?  In general, your business is liable under the doctrine of Respondeat Superior, which is a fancy way of saying that an employer is liable for the negligent actions of his or her employee.  Appropriate insurance coverage should cover these types of claims.

Related Blogs

• Related Blogs on Chapter 3: Employee Conduct

This blog contains the content of Chapter 1 of my book, Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits.  Chapter 1 deals with Premises Liability and reads as follows:

A business owner has a duty to it’s invitees (again, customers, employees, delivery personnel, etc.) to warn of dangerous conditions that are known to the business plus a duty to make reasonable inspections to discover dangerous conditions and then either make the dangerous conditions safe, or at least warn of the hazard.

In order to better illustrate what I mean, it may be helpful to look at cases that I have handled in which a store was negligent for a dangerous or hazardous condition.  A week doesn’t go by when I don’t get called by someone who fell at a supermarket.  Usually, the potential client was caused to fall by something slippery, like juice, or melted ice, water leaking from a refrigerator or freezer or water from where a mop was used.  The most important things for me to are: (i) whether the store knew or should have known about the hazard, (ii) whether the potential client was injured as a result of the fall and (iii) whether there were any witnesses.

The first (whether the store knew or should have known about the hazard) is the most difficult for my client to know and thus for me to prove.  This is where witnesses and surveillance video come in.  I ask my clients if they had any idea how long the hazard had been present.  If they say they have no idea, unless the injuries are really significant, I usually don’t take the case because I don’t want to waste my time and money and the client’s, on a case that I don’t know if I can prove at least until I file suit and get into the discovery phase of litigation, which may give me access to video and statements from employees.  But here’s the thing, you would probably be surprised to know just how many clients tell me that just after they fell, another shopper, or even an employee, told them that the spill had been there for hours and no one had cleaned it up, or that the freezer had been broken for a week and it’s a miracle no one fell sooner because of the puddle of water.  As the owner or manager, you must advise your employees not to talk to someone that is injured, other than asking if the injured party needs medical attention and to inform the injured party that store would like to complete a report (see below) about the incident.

There are other ways, of course, to estimate how long it has been since a hazard had been created.  I successfully handled a case for a woman who was caused to fall from water which leaked from a bag of melted ice.  The fact that the ice melted created enough of an inference that the hazard had been there long enough for the store to recognize it and clean it up, or warn of the risk.

The key for the store to remember is to inspect the premises at reasonable regular intervals.  How often that is may be impossible to answer.  But the more often the better.  One or more employees should be charged with the duty of inspecting aisles in the store and documenting that everything is clear and safe.  Include the employees initials and the time of the inspection on any forms that you may create for this purpose.

Regarding the second component which I mentioned above (i.e., whether the client was injured), naturally, there is little the store owner/manager can do to control this point.  However, I will pass on a trick that insurance companies use.  As soon as the fall occurs, or any other situation in the store in which an invitee appears to have a potential claim, fill out a report.  Among other details, including the identity of the injured party and witnesses, ask the invitee whether they’re injured.  Often, soft tissue pain doesn’t start for hours, or even until the next day.  So, if the client says they are not injured, or more likely, that they don’t think so, put down their direct quote on the report and have the client sign and date the report on the bottom.  Although this document may be inadmissible at trial, it is nevertheless likely to be helpful.

Beyond injury information, be sure to include on the report the potential claimant’s version of how the incident occurred.  If there was a sign warning of the hazard, ask if they saw it and take photos of the sign which should be attached to the report.  Ask also if they saw the hazard itself, before the incident.  Do not include the store’s version of how the incident occurred on the report and do not discuss the incident with anyone other than your store’s own insurance company representative.

Independent witnesses are great, but not always available.  Install a surveillance camera.  In most instances, the video will help support the store’s version and it will also help dissuade crime.

When an object in the store (that belongs to your business) caused the injury, take it out of circulation.  If the item was for sale, put it in the storage area and make sure employees are instructed not to tamper with it.  The item is evidence and may need to be inspected by an expert in the future.  Your failure to remove the item and preserve it, is known as spoliation of evidence, which may invite a spoliation instruction to a future jury.  Such an instruction may free the plaintiff from otherwise bearing the burden of proving that the item in question was defective or a hazard.

Finally, do not forget that the exterior of your store may be your responsibility.  You must be sure to read your lease and understand what areas your store is responsible for.  For example, if your business is responsible for the parking lot, you must make sure the lot is kept safe, well lit and clear of hazards, just like the inside of the store.  The same goes for the sidewalk.  Use a critical eye when inspecting the outside of the business.  Do not neglect this area.  Look for things that are out of the ordinary, such as “parking stops.”  A parking stop is simply the low to the ground concrete barrier that is placed at the end of the parking space to let the driver know that he is nearing the end of the parking spot.  I do not recommend using the stops.  If they move to a location other than where they were intended and someone falls, your store may be liable.  Also, city, county or state codes may require keeping them painted a certain color.  These codes should also be reviewed to make sure everything on the outside of the store is being done appropriately.  Par particular attention to laws about how long before ice or snow need to be cleared and the painting of curbs.  Also, constantly inspect the sidewalks and parking lanes for hazards and keep a report, as suggested for the inside of the store.  All reports should be filed and saved.

Don’t Get Sued by Roger Gelb is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
Based on a work at www.gelbandgelb.com.