WHILE CUSTOMERS LOOK TO SERVICING THEIR VEHICLES AT YOUR DEALERSHIP, SPRING IS A GOOD TIME TO TAKE PREVENTATIVE MEASURES WHEN IT COMES TO LEGALLY PROTECTING THE BUSINESS TOO
As the weather starts to warm up, for many of us, thoughts often turn to hitting the open road for a weekend getaway. As a result, motorists (and your customers) want to ensure their vehicles are road-ready via springtime oil changes, inspections, tire changes and overall maintenance. Technicians will often follow a checklist to ensure both vehicle and customer are ready to hit the road, minimizing the risk of mechanical failure or accidents occurring as a result.
So that’s spring maintenance for your service customers but on a bigger scale, what are you doing to insure your store is ready for the bustling spring and summer months, especially on the legal side. In many cases, much like your customers’ vehicles, a little legal maintenance might be just what the doctor ordered.
In a scenario that can be described as similar to reactive maintenance on a vehicle (i.e. not addressing something until it breaks) small and mid-sized businesses often don’t address legal issues until they’re caught in the quagmire of a lawsuit. As a result, taking stock of your legal health now could help minimize unnecessary risk and avoid costly mistakes in the future.
Part of your legal maintenance strategy should include questions like:
• Am I planning on hiring or firing staff? Being familiar with employment laws will save me time and potential aggravation;
• Will I need to renovate my dealership this year? Contractors may not do the work as quoted, which could lead to lengthy and aggravating disputes;
• Do I have problems collecting money? If so, I’ll need to check if my contracts contain credit term language to protect my business and make collection of possible bad debts;
• Am I moving into a new business location? New neighbors are not always friendly and may be a nuisance, requiring me to take legal action.
Auto retailing has its own vulnerabilities involving suppliers, contractors, and employees. Not only that, but warranty disputes with customers can be a distraction, and dealing with a legal battle by taking time away from your business could result in significant financial losses. A dealership owner that’s opening a new location also needs to be concerned with legal landmines such as zoning restrictions, licensing, and personal liability. If your place of business is sued, and you are the sole proprietor, the plaintiff may come after your personal finances.
LITTLE TO STAND ON
Some real life scenarios can often paint a picture of how difficult things can become if your business isn’t adequately prepared. Take this example: A technician in your service department is installing a tire upon a wheel with a mounting machine when the tire explodes, causing serious injuries. In one such case, the Ministry of Labour investigated and found that the air pressure pumped through the machine far exceeded that recommended by both the machine and tire manufacturers. After a hearing, a significant fine was levied against both the company and a supervisor. How do you defend yourself at such a hearing?
Perhaps worse, think what happens when a civil case goes to court. In some cases, a judge can order you to pay the other party’s legal costs. Say both parties owed $18,000 — now you’re on the hook for twice that amount. This could have a significant impact on the bottom line for any small or medium-sized business.
In another scenario, a car dealer in Windsor, Ont. was fined $20,000 by the Ontario Motor Vehicle Industry Council (OMVIC) for a series of ethics violations. This can happen if a dealer sells a vehicle without disclosing its accident history or the fact it has liens against it.
But what if the person who sold the car to your dealership lied about its past? If you re-sell it in good faith, could the same thing happen to you?
COST EFFECTIVE MEASURES
For businesses without an in-house lawyer, legal expense insurance (LEI) can be a wise and economical choice. Many savvy small business owners consider LEI as a means to ensure the wellness of their companies and facilitate future success. In the examples mentioned above, your legal fees would be covered by an LEI policy, easing your financial burden while mounting a defence. The policy would also cover legal fees of your opponent in court, should the judge hold you responsible for them in addition to your own. Such protection could potentially save your company from bankruptcy.
In short, LEI covers small businesses from many unexpected and financially stifling legal fees. Legal expenses can add up quickly —the average hourly rate for an experienced lawyer in Canada is $379. The approximate cost of a one-day criminal trial is up to $5,000, while the average cost of a two-day civil action trial is over $18,000 and can reach beyond $37,000.
PROTECTION ON MULTIPLE FRONTS
Also consider the difficulty a new business owner may have navigating Canada Revenue Agency (CRA) regulations regarding income, GST, HST, or payroll deductions. Even the most honest professionals can find themselves in the midst of an audit if they wade into uncharted fiscal waters. An LEI policy will provide you with a tax lawyer and pay for the accounting services to help you defend your business in tax court.
Furthermore, new legislation can be passed that affects your business at any time. For example, in Nova Scotia, the Automobile Trade Association (ATA) recently informed some Sydney-based dealers that the Competition Bureau was concerned with their business practices.
Supposedly, the business owners in question tried to coordinate their hours of operation. A DAS policy could have provided a particular dealer with guidance and advice before entering into discussions with the other dealers, and helped them avoid a potential government investigation.
Disputes over billing can create further frustrations. What can be done when a customer refuses to pay their invoice to your collision centre, or accuses the dealership of negligence or poorly executed repairs on their vehicle? Who mediates in misunderstandings between a client and the dealership regarding non-warranty vehicle repairs?
GETTING BACK TO BUSINESS
Proprietors who can consult legal professionals through a helpline are often able to avoid problems that can quickly grow into costly headaches.
When someone invests in LEI, unexpected legal costs are less likely to be an issue. Legal expense insurance doesn’t just provide peace of mind. It’s a planning tool that can make a business healthy, sound and successful by mitigating potentially catastrophic legal costs.
An LEI policy can give business owners access to guidance, representation and legal cost coverage for many legal issues and its something that’s becoming more and more of a consideration for many businesses.
Since it was founded in 2010, DAS Canada has noted the increasing interest and demand from small businesses and consumers nationwide for LEI. In response to that, the firm has developed a suite of custom solutions designed to mitigate unexpected legal fees that can arise from operating a business.
Such a policy can be a solid long-term investment in the well-being of any small to mid-sized business. Smaller companies often can’t afford in-house legal counsel and by investing in LEI are often able to obtain the kind of policy that limits risk and allows owners to devote their time and energy to growing a successful enterprise.
