Legal liability is becoming a major concern for small businesses across Canada, with a recent study by ARAG Legal Solutions Inc. revealing that seven out of 10 small businesses have dealt with at least one legal issue in the last three years.
This is a 230% increase from the results of a similar study conducted in 2015, which found that only three out of 10 small business owners have dealt with legal issues.
“As an industry, we could do better to ensure our small-business clients are aware of their options, and, as prudent risk managers, ensure protection against legal risk is included in their insurance portfolios,” said Jeff Kless, ARAG’s vice president, marketing and strategic initiatives.
Surveying nearly 1,000 small business owners across Canada, Kless said his team sought to identify how the legal risk profile has changed since the 2015 study was conducted.
In ARAG’s latest study, over half of small-business owners reported that the legal disputes they faced had a large or moderate financial impact on their businesses, while 70% said they had spent a lot of time dealing with legal disputes. Additionally, 73% said they had experienced a moderate to a lot of mental stress on a personal level when dealing with these legal disputes.
Three out of 10 small business owners also reported knowing another business owner who was significantly affected by, or lost their business following, a legal dispute.
In addition to the financial and mental strain brought by legal woes, the report went on to detail how small business owners worry about the potential negative impacts of legal disputes on their businesses’ reputation and productivity, as well as future plans for growth and expansion.
Considering these concerns, the ARAG study highlighted how the insurance industry has a long way go when it comes to communicating better with its clients. According to the report, six out of 10 small business owners said their broker or insurer had never spoken to them about the financial consequences of a legal dispute, while seven out of 10 said their broker or insurer had never spoken to them about the mental impact of such disputes.
Read the full report to learn more about legal risks facing Canadian small business.
