It is a well-known fact that we live in an extremely litigious society. This may be explained, in part, by the fact that never before has a generation known more about our nation's laws and the workings of the legal system. We have instant access to statutes and recent court decisions via the Internet. Additionally, blogs, message boards and posts help to educate consumers about their legal rights.
Aside from an increased knowledge of legal rights, the following may also contribute to the frequency of consumer lawsuits: 1) a weakened economy; 2) the ease of finding a plaintiff's attorney to take your case; 3) recent changes to consumer protection laws favoring consumers; and 4) the fact that our legal system allows people to sue for just about any reason at all.
For those in the kitchen and bath industry, there are a number of factors that can create liability and lead to litigation. These include mistakes, misrepresentations, confusion, a lack of formal procedures, a lack of communication, taking shortcuts, a failure to follow through, poor recordkeeping and a failure to report problems.
In the coming months, this column will address the top five preventative measures that can help your business minimize litigation. In general, they are 1) proper recordkeeping; 2) maintaining proper communication; 3) conducting thorough site inspections; 4) reporting claims in a timely manner; and 5) avoiding damaging admissions. This article will focus on the first of these measures: keeping comprehensive records.
MAINTAINING ORDER
While proper recordkeeping may seem like a "no-brainer," far too few kitchen and bath companies actually do so. Although the task does require a commitment of time, ensuring that your records are comprehensive and well maintained will make it much easier to respond to frivolous claims by customers. Conversely, poor record keeping can destroy your defense to a claim and actually increase the likelihood that you will end up paying out money to settle. Following are some tips to keep in mind when getting your records in order.
• Create a client file. It is imperative that you establish a standardized method for document management of all of your company's records, including contracts, prospective clients, orders, complaints and other documents. For example, every customer should have his/her own client folder. Within that folder should be every document related to your interaction with that customer. These documents should include correspondence between your company and the customer, notes, memos, receipts, invoices, orders, photographs, plans and drawings, emails and any other document that relates to that customer. This allows for easy access to documents when issues arise.
All documents in the folder should be filed in reverse chronological order (i.e., from oldest to most recent.) The documents should be secured in the folder by two-hole fasteners to prevent them from falling out of the folder.
• Reduce all verbal communications to writing. All conversations with your client should be reduced to writing, including telephone conversations and informal discussions. Often, a customer will telephone to authorize a charge, request a change to an order, confirm styles and colors and make other requests. Even if you have a memory like that of an elephant, you should make sure that you write a memo that details the date and time of the call and summarizes the discussion between you and the customer. This should be done for each verbal communication. The memos should be immediately placed into the customer's file. Frequently, having a detailed account of all customer communications can resolve a dispute in your company's favor before a lawsuit is commenced.
• Develop a document retention policy. It is important to save client files for a sufficient amount of time because you never know when a good customer could go bad. For example, if a customer purchases cabinets from you, and during the course of the sale, you advise her that the finish she chose will not hold up to her anticipated level of use and abuse. Being careful, you write a memo about your warning and the customer's decision to ignore it, and you even obtain the customer's signature on it. However, after the installation of the cabinets, you throw out the file. Two years later, you are sued by the customer because the finish, as predicted, did not hold up. Unfortunately, you now have no proof of your warning and you will most likely end up paying to settle the claim or replacing the cabinets.
Considering that the statue of limitations for many breach of contract, warranty and negligence claims run from two to eight years, depending upon your state, it makes sense to maintain your client files for at least six to eight years.
PAY OFF
Keeping comprehensive customer files can help your company avoid unnecessary litigation. The time and effort that you apply to maintaining organized and complete client files will pay off in spades. To learn about other ways you can protect your business against litigation, check back in a month for a discussion on how to limit your liability with proper communication.
—Peter J. Lamont, Esq., is a commercial litigation attorney with offices in Hawthorne, NJ, as well as Massapequa, NY. His practice focuses on the representation of small- to large-size companies in the building and design industry, as well as individual designers and architects. To contact him with questions and suggestions on topics for future articles, please email him at plamont@peterlamontesq.com or call him at (973) 949-3770.
