We’ve all seen the headlines about immense punitive damages. Entire legal thrillers have been written around a protagonist bringing down a corporation that had to pay out millions, or even billions, in punitive damages. It might be the stuff of fiction and nightmares, but punitive damages – particularly in the US– can be enormous and damaging to a corporation. For example, Novartis was ordered to pay $250 million in a gender bias lawsuit and Shell had to pay $50 million for undisclosed material information. Lawsuits can be very expensive – not just because of legal fees and lawyers, but also because of awards for compensation. And if damages are awarded in addition, the costs can skyrocket.
In this increasingly litigious world every business – large or small – needs insurance to protect them from the large costs associated with lawsuits. While it is nice to think that it will never happen to you, there is a real danger that something might go wrong. If it did, and you and your company were taken to court over gross negligence – particularly in the USA – could your company survive the financial pressures created by punitive damages? And what of the reputational and emotional costs?
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