When someone gets hurt at a small business, it can create significant challenges for the business owners. Resolving these types of cases typically incurs costs of around $52,900 plus an additional $3,000 or more in legal fees. That’s a significant amount that many small businesses don’t have! As a result, about 40% of small businesses have to close for a while after an injury happens at their store. Their insurance costs also increase by 10-20%, exacerbating financial challenges.

It’s essential to acknowledge the challenges faced by small business owners in such situations. They work incredibly hard and incidents like this can shake their business’s finances and sometimes their dreams. The goal here is to explore ten key ways these legal cases impact small businesses, providing a better understanding of the challenges business owners encounter.

What is a Personal Injury Attorney?

A personal injury attorney is a legal professional who assists individuals who have sustained injuries or harm. If, for instance, you suffer a slip and fall in a store, resulting in a broken arm, seeking the guidance of a personal injury attorney is advisable. Similarly, if you experience injuries due to a car accident caused by someone else’s negligence, a personal injury attorney can provide assistance.

In Virginia Beach, a personal injury attorney caters to the needs of residents who have been injured. Take the example of Billy, who was riding his bike in Virginia Beach when a car collided with him. The driver, distracted by texting, caused Billy to break his leg, and his bike was severely damaged. In such situations, individuals like Billy or his parents could reach out to a personal injury attorney in Virginia Beach for advice and legal support.

The attorney, well-versed in Virginia laws, would thoroughly investigate the accident. Additionally, they would endeavor to secure compensation from the driver’s insurance company to cover Billy’s medical expenses and replace his damaged bike. Acting on behalf of Billy, the attorney strives to obtain financial reparation, providing significant relief to him and his family during what is undoubtedly a challenging period.

1. Substantial Financial Settlements and Legal Costs

The average personal injury claim settlement faced by small businesses hovers at $52,900 while legal expenditures range from $3,000 to a staggering $150,000 per case (Insurance Information Institute 2022; Small Business Trends 2021).

For context, legal costs alone can consume 3.6-179% of the average small business’s annual income (SBA 2023). With small businesses grappling with razor-thin profit margins, these financial burdens can push operations to a breaking point.

2. Disruption of Business Operations

Settlements and legal costs merely mark the beginning as 40% of small businesses wrestle with temporary closures post a personal injury claim, enduring an average business interruption period of 24 days (National Federation of Independent Business 2023; Insurance Journal 2022).

Resuming operations requires navigating insurance complexities, managing payroll, communicating with customers, and enhancing workplace safety—a daunting challenge amid financial and legal strains.

3. Reputational Damage and Loss of Revenue  

As personal injury claims necessitate temporary closures, small businesses often confront reputational damage subsequently. With 58% of consumers avoiding businesses with negative online reviews, such reputational impacts lead to a potential revenue loss of 22% (BrightLocal 2021; Harvard Business Review 2019).

Rebuilding reputation requires astute communication strategies involving transparency, accountability, and solution-focused dialogue.

4. Increase in Insurance Premiums

The financial aftershocks of personal injury claims surface in increased insurance premiums as policies come up for renewal following an incident. Premiums can spike by 10-20% over a single renewal while exhibiting a cumulative rise of 38% over three years (Risk & Insurance 2023; Insurance Journal 2021).

As higher premiums strain finances, they necessitate changes in policy limits, coverage and deductibles – leading to higher out-of-pocket costs.

5. Lower Employee Morale and Lost Productivity

When someone gets hurt at work, it creates challenges for all the employees. Studies show that employee morale can decrease by 33% (Occupational Medicine 2021; National Safety Council 2022). That means people feel less motivated and happy at work. Productivity can also drop by 50%, meaning people get less work done than normal.

Employees go through extra stress and can feel burnt out or want to quit. After an injury at work happens, managers have to try to make people feel better so they want to stay and be as productive as possible again. Some ideas include making the workplace safer to alleviate fears, keeping employees informed about what is happening, ensuring managers are more visible and available for communication, and providing access to resources for those struggling emotionally.

6. Legal Compliance Overhead 

After a workplace injury claim, small businesses have a lot of new legal stuff they have to do. There are many regulations around settlements, keeping records, workplace safety policies and leave rules.

Dealing with all these legal matters can mean small businesses have to spend between $12,000 and 200 hours per year on them (National Small Business Association 2023; NSBA 2023). Using technology tools that take care of the legal and compliance tasks automatically makes this easier for small businesses.

7. Alterations in Insurance Policies  

Small businesses also often face insurance changes after an injury claim that they may not realize will happen. Not only can premiums and pricing change, but coverage limits might also be adjusted.

For example, business insurance for general liability that covers personal injury claims can cost between $750-$2000 more per year after a claim (Insureon 2023; Insurance Journal 2022). Deductibles, exclusions, and total payout caps can change as well, meaning the small business ends up covering more costs out of its own pocket. Business owners need to carefully review their new policy.

Bottom Line

When it comes down to it, going beyond the urgent legal tasks allows small businesses to put policies and processes in place to handle disruptions better next time.

While injury claims create challenging ripple effects, being proactive, open in communication, and thoughtful in analysis helps businesses stay resilient. Remember, tough situations also provide opportunities to become more resilient. Small businesses must take advantage of the chance to learn.

Frequently Asked Questions

• How do injury claims at work affect small businesses?

When a workplace accident or injury occurs and there is a claim, it unleashes a bunch of moving parts for a small business. After an injury, businesses often have to face increased legal costs, higher insurance rates, lost productivity from staff, and rebuilding customer trust. Small companies usually do not have the big cushion of funds and resources like massive corporations to absorb these major impacts without hurting profits or operations. Just one claim can badly hurt a small business if they don’t have systems in place to handle it.

• What happens with insurance after an injury claim?

After an injury claim is filed against them, most small businesses see their insurance rates go up the following year. In some cases, insurance may no longer fully cover the costs of claims, either through caps, exclusions or higher deductibles, which the business owner must pay out of pocket first before the insurance pays out. Recently changed policies need to be fully reviewed and understood so the small business owner knows their new liabilities and what may not be covered anymore.

• How can small businesses bounce back after an injury claim?

There are a few important steps small businesses can take after an injury claim to support long-term resilience and financial health:

• Investing in more robust safety processes, training and equipment

• Finding ways to streamline and automate legal/administrative tasks

• Communicating openly and transparently with employees and customers

• Asking strategic questions to shape smarter policies and systems for the future

The key is to take a proactive and analytical approach to utilizing the difficult situation as a growth opportunity for positive change.