One of Steve Martin’s great films is “The Jerk” – I grew up loving this movie. He stars as a budding entrepreneur who stumbles into success with an invention for eye glasses – The Opti-Grab – a dubious accessory designed with a handle that stops glasses from sliding down your nose. Almost overnight, his invention takes off – selling more than 6 million pairs of his ill-fated glasses. His character is portrayed as living the good life after his new-found success – cruising around the globe on yachts and airplanes. While throwing an over-the-top party, he is served a class action lawsuit claiming that his innovative glasses caused people to go cross-eyed. The movie ends with his losing everything. It’s one of the funniest movies I have ever seen – until I was starring in my own version of the movie.
Unfortunately, getting sued today is as routine as the common cold. The legal system has spawned billion dollar insurance products to protect companies from overzealous lawyers and customers looking for compensation. This industry didn’t happen overnight, and there’s good reason for the legal system we have – it comes from unscrupulous businesses selling products or services that do more harm than good to customers. Of course, there’s a huge gray area in deciding when something is more harmful than helpful, and that’s why insurance companies created liability insurance.
Fighting lawsuits is expensive and, for small companies, liability insurance isn’t a nice-to-have accessory, it’s a must-have product, especially when you’re selling fitness products. Lawsuits are so expensive that many less-than-honorable lawyers will take their chances on submitting lawsuits that are baseless just to see if they can get a quick settlement from insurance agencies – because they know how insurance company’s cost-benefit thought process works. In many cases, it’s cheaper to pay a questionable claim for $25,000 rather than go to court. It turns out that time on the bench being judged by your “peers” can cost you many multiples of the initial claim. When you factor in those costs, paying a frivolous lawsuit looks like a bargain.
Business school doesn’t prepare you for lawsuits – they spend their time coaching you on how to avoid them. The fact is when you have a popular product, you cannot prevent the inevitable – getting sued… and often. I remember my first lawsuit – Someone claiming to have been injured using my product, the Perfect Pushup – the floor hit them in face and broke their nose. They were asking for $30,000 in damages. Ambulance-chasing lawyers like the ones who submit claims like that one like to “rattle” business owners (i.e. intimidate) by taking the extra step of having you “served” a lawsuit – that is, paying someone to show up at your doorstep, handing you the equivalent of a FedEx package and saying, “You have been served.” Trust me, that gets your heart rate going. For me, it was as much hurtful as it was shocking. Questions race through your head such as, “Why did this person hire a lawyer instead of just calling us ? Don’t they know we would have made it right with them?” That’s the hurtful side, for no one in my business wanted to hurt anyone – we were in business for the exact opposite reason – we wanted to help people build up their bodies not break them.
On the flip side, lawsuits bring out other emotions, such as “Oh, you want to fight me? Okay bring it on!” And of course, that’s EXACTLY the emotional trap some lawyers want you to fall victim to. And that’s where your insurance company can provide you with a cooler head. On many such occasions, they would let me rant and rave to get my frustrations off my chest (my CFO/Partner played this role for me as well; he’s quite good at listening – a very valuable skill). Once I exhausted myself, they would calmly lay out their action plan for making these sometimes ridiculous lawsuits go away.
After a while, you become desensitized to being sued. You begin to think like your insurance partner (good insurance companies are partners with you), and you start viewing each legal claim as they do: “How much will this cost me in time, money and people?” I was starting to feel experienced at handling lawsuits where I was being sued for “wrong doing” such as, “your product made my whole body sore,” “pulled muscles for working out ‘too hard,’” or my favorite one, (which made the New York Post), “wife sues fitness company for ‘loss of companionship’ with her husband” – seriously?!
The more products you sell, the more lawsuits you get. It’s a fact – expect it and be prepared for it. But all the preparing in the world doesn’t prepare you for actually going to court and standing trial. And that’s exactly what we did when my insurance partner called once and said, “Alden, we’ve just been served a lawsuit that we MUST win.” Usually my insurance colleague was relaxed about our – what seemed like – weekly lawsuits; but there was something different about his tone as he said the word “M U S T.” I joked with him and said, “and if don’t, do I end up like Steve Martin in ‘The Jerk?’” And what he said next rocked me:
“You’ll be the star in the sequel.”
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