Liability in Loss Prevention

The issue of liability, particularly in retail, has been around forever, and has been a concern - primarily for the bean counters - for just as long.

Because we are such a litigious society - translation: anyone can sue anyone for anything, regardless of merit - the holders of the business purse strings are understandably concerned about liability. But as someone who lectures and trains on the issue of liability and liability avoidance, I can categorically state that they are concerned about liability for the wrong reason. And it is our job to demonstrate the difference between what they are concerned about and what they should be concerned about.

What bean counters are concerned with is avoiding all lawsuits, period. What they should be concerned about is avoiding and losing legitimate lawsuits.

A "liability" does not exist until and unless a legitimate claim is made and lost (the operative words being "legitimate" and "lost").

OK...I know I will get responses that say that it doesn't matter if a claim (lawsuit) is lost because there is still a cost involved in fighting any claim. But it is not the same: the cost of fighting a lawsuit - presuming that you can demonstrate that the claim is erroneous - is a business expense, not a liability (a subtle but significant difference). Companies pay to have attorneys on staff, or have attorneys on retainer, regardless of whether the attorneys have anything to do - a reasonable, proactive expense, not a liability (just as is car insurance - the premium is paid regardless of whether the insurance is used or not). So paying an attorney to fight a lawsuit known to be without merit or frivolous is a business expense, not a liability. Here's a question to ask your bean counters: in order to save money, shouldn't we cancel our fire insurance since we haven't had a fire? Same concept: some business expenses are important and necessary.

IF (a big, capital IF) things are done correctly - meaning procedurally correct from both a legal and a company policy perspective - the chances of a legitimate, successful lawsuit are minimized to a totally acceptable degree. Can there still be lawsuits? Sure. Will those lawsuits have to be challenged and fought? Of course. But will there be successful lawsuits? Probably not.

There is always the possibility for lawsuits - not just from LP activities, but for any business operational reason: slips and falls, price manipulation, a rude associate, etc. By now, businesses should realize that they cannot avoid all lawsuits. What business CAN do is establish policies and procedures that minimize the potential for legitimate claims.

The retail industry, as well as the insurance industry, is deathly afraid of any and all lawsuits. It is a demonstrable fact that both the retail and insurance industries settle far more claims than they fight in court. The stated reason? It is "far more cost-effective" to settle than to fight. But therein lies the misperception. For any given claim it may be more cost-effective to settle. But in the long run it is not, because the knowledge that claims will be settled is the incentive that people use to file many more claims than they would if they knew - KNEW - that they would have to pursue the claim through lawsuit and court proceedings. Settling claims as a policy is poor practice which spawns frivolous and without-merit claims because the claimants know that anything they get will be the proverbial gravy, because it costs them little or nothing to file the initial claim; and the likelihood of getting something is great. Settling claims creates avoidable - and thus unnecessary - liability risk.

On the other side, fighting lawsuits is a proactive practice that will reduce the number of frivolous lawsuits and claims; and the number of lawsuits and claims will drop dramatically.

What I do in my training lectures is present this information from the legal and financial perspectives so that the decision-makers understand what they are doing. I get them to understand that protecting assets is the ultimate goal and that this is a multi-step process. This is the message that everyone has to make sure that their organizations understand so that LP work can be done successfully, with a minimum of liability risk.

This is what your jobs should also be.