| Friend,
Yesterday, I told you about all the ways and reasons why you might be sued. I know, it's boring as all hell. But, having at least a rudimentary understanding of the law can help you avoid legal woes.
So, I hope you took notes.
In today's email, I'm going to discuss several strategies you can use to protect yourself from lawsuits. This is a long email today, so let's get started.
Prevention
Preventing lawsuits starts with being a professional in everything you do in your dojo. That means being the best instructor you can be, and training your staff to the same level of excellence.
At the very minimum, you should make sure your dojo meets all building code standards, that it is free from unnecessary physical hazards, and that all your equipment and mats are in good working order and free from defects.
Also, you should take care of obvious hazards immediately. For example, if it's a rainy day and students are trailing water inside your school, that's a slip and fall hazard. Put down a traction rug so no one falls; problem solved.
Most of this prevention stuff is just common sense--but it's also taking actions that a court would consider to be a reasonable amount of care, so if something does happen you can show that you were not negligent in your duty to protect your clients.
You should also consider what goes on in your classes when you're not there. I used to have a young man working for me who was a really nice kid, but he had all the sense that God gave a turnip. And when it came time to do a fun drill at the end of class, it was always chaos.
No amount of coaching or counseling this young man could correct the situation, because you can't teach common sense. I saw that he was an accident waiting to happen, so I removed him as an instructor. Choose safety over convenience, always.
Preparation
Preparing to face a lawsuit isn't all that difficult. For most school owners, it means taking a few simple steps while you're setting up your school, and during the course of running your business.
The very first step you should take to prepare for a lawsuit is to set up a legal corporation for your business. In most cases this will mean forming a corporation or a limited liability company. LLCs are easier to manage, because they don't require board meetings and the like, but they aren't fully recognized in all jurisdictions.
Regardless of which entity and business structure you choose, you need to make sure it's done legally (all paperwork filed with the state and all fees and taxes paid yearly). And, you need to make sure you don't commingle your personal and business funds.
Once you set your business up as a legal entity, you have to accept that it is a separate entity from that point forward. So, you have to keep all your business money separate from your personal money.
If you don't and you are sued, the argument could be made in court that your corporate entity is just a sham. This is what is known as piercing the corporate veil, and any attorney worth half their salt will do this as a standard strategy in a lawsuit against you and your business.
Of course, the reason why they do this is so they can come after your personal assets; your home, cars, retirement funds, etc. So, keep your money separate. Don't use the business debit card or checking account for personal expenditures.
Also, pay yourself a regular salary, and only take more money from the business at the end of the year in one lump check as your year-end bonus (and then increase your salary the next year, so your salary absorbs whatever profit your business makes and you pay less in taxes).
Protection
Protecting yourself should a lawsuit occur generally involves implementing two simple strategies: - Using iron-clad liability waivers
- Getting adequate liability insurance coverage for your school
Let's take a look at each to see how to use them properly.
The Thing About Liability Waivers...
I know that many people say liability waivers aren't worth the paper they are written on, but in reality it varies from jurisdiction to jurisdiction. Here in the U.S., in some states they hold a great deal of power to protect the business owner from being sued, should a client be injured.
That is, if they are worded right. And this is where most school owners screw themselves. See, most school owners will go the cheap route, and instead of having a local business attorney write their liability waiver--one who is familiar with the laws in their jurisdiction--instead they'll use a waiver they got from a buddy, or pull one off the web.
Huge mistake!
One thing I learned when I studied contracts is that if even one comma is out of place in a legal contract (which is what a liability waiver is), it can nullify that clause or even the entire contract. This lesson was later hammered home when a client who was an attorney poked holes in my waiver. She was kind enough to read it and tell me how pitiful it was, and inform me it would never hold up in court. Lesson learned.
So, at the very least, hire an attorney to review your liability waiver.
Regarding Liability Insurance
Now, regarding liability insurance, remember that you buy liability insurance to pay for court costs and damages in case you are sued and you lose in court. Also, you buy it because insurance companies hate to pay out in claims. For that reason, they have much better attorneys than you can afford, and they'll do whatever they can to avoid paying a claim.
That's not to say that their attorneys will work for you though. On the contrary, in some cases they will fight to prove that you did something that nullifies your coverage, and they'll leave you holding the bag for court costs, damages and so on should you lose a case in court.
And that's why you need to buy your liability insurance from a reputable company.
There are a million and one fly-by-night companies out there selling martial art school insurance. You need to make sure when you get a policy, that it's backed by an A-rated company, and not a company that will fight you to avoid paying a claim.
The problem in finding insurance for martial arts and fitness instruction is that it is considered to be a high-risk business. So, few top-rated insurance companies are willing to write policies that cover martial art schools.
When choosing a policy, don't just accept what the insurance agent or broker tells you with regards to the company's rating. Instead, find out what the company's financial ratings are with all four rating services: - A.M. Best
- Fitch
- Moody’s
- and Standard & Poor’s
This will give you a much better picture of how reliable that company will be in paying out claims. The bottom line is that financially unhealthy insurance companies will fight to pay claims, while financially strong companies will generally pay faster and with less hassle.
Finally, make sure that you don't do something stupid that will nullify your coverage. If your coverage doesn't cover certain high-risk activities, you need to buy a separate policy to cover those activities, or you need to stop doing them in your school. Make sure you know what your policy covers, so you can avoid nullifying your policy.
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That pretty much covers the basics of protecting yourself from lawsuits.
Next up, we'll look at financial risks to your business, and how to protect yourself from them. Stay tuned.
Until next time,
Mike Massie MartialArtsBusinessDaily.com
Quick-start Guide to My Books and Resources: - Looking for a list of books and resources I've written? Click here! - Need business coaching to grow your dojo? Click here…
P.S. - Spending a few hundred dollars to have an attorney review your liability waiver could save you tens of thousands down the road. Don't be a cheapskate when it comes to your legal documents!
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