Damage Control

This story appears in the August 1998 issue of Entrepreneur. Subscribe »

When a customer falls on the ice in your parking lot, you know you may be liable for his or her injuries. The same goes for someone hurt when precariously stacked boxes tumble over or for someone who breaks an ankle because no one warned him or her about the slippery floor. The law expects businesses to correct any known hazards or warn customers about them. But what if one of your customers is injured in a fight with another customer? What if a crime occurs in your business's parking lot? Your potential liability in these cases may surprise you.

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Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

Out Of Bounds

Recent court cases have extended the concept of "premises liability" in unexpected ways. Consider a recent case from the Appellate Court of Illinois. Four customers at a bar and grill began an argument that turned into a fight once they went outside. The bar cleared out, and several other customers joined the brawl while the owner and a few employees watched from inside. Eventually one customer was stabbed in the back, neck and chest. He sued the bar, claiming its owner and employees breached a duty to help.

The trial court dismissed the case, ruling that the business owner owed no duty because the brawl took place in the street--off the tavern's property. But the case was reinstated on appeal. The higher court ruled that business owners may not avoid their duty to protect customers from criminal attack just because an attack takes place outside their door--"especially when the owner contributes to the altercation by sending patrons into it."

This case breaks new legal ground. Traditionally, a business has had a duty to protect the public from harm while people are on the premises for business purposes. This includes suppliers, customers, vendors, contractors and employees (although workers' compensation covers most employee injuries whether or not the employer was negligent). The duty of care encompasses known dangers such as uneven pavement, and foreseeable dangers such as a threat of attack. Traditionally, however, that duty ended at the property line. The Illinois case expands the duty of care beyond the property line if the business owner knows about the threat and does nothing to stop it.

Criminal Intent

Another traditional duty is to warn people of known dangers, whether it's by posting a "wet floor" sign or mentioning the icy sidewalk you've been having trouble keeping clear. In another groundbreaking case, however, a warning wasn't enough. This case involved a woman who was approached twice in a bowling alley by a man she didn't know who demanded that she go to bed with him. The bouncer, who'd overheard, warned her as she was leaving at 2:00 a.m. not to go outside because "that goofball" was out there. Ignoring the warning, she walked to her car, where the man was waiting. He stabbed her repeatedly. The Supreme Court of California ruled that the bowling alley was liable because, knowing the potential danger, the bouncer should have walked the woman to her car.

What if there's a robbery? According to a recent case decided by the California Supreme Court, your employees are not required to cooperate with the robber to protect customers. In this case, a robber walked into a fast-food restaurant, seized a customer at gunpoint, and threatened to shoot her if the clerk didn't open the register and hand over the money. The clerk stalled, saying she would have to go back and get the key. The robber shoved the gun harder into the customer's back and screamed at the clerk, who then complied.

The customer later sued the fast-food chain, claiming that the clerk's failure to immediately comply caused her back injury and emotional distress. But in this case, the California Supreme Court ruled that the business had a right to resist, even if a customer was endangered. After all, public policy demands not encouraging compliance with crime. No state has imposed a duty on business owners to cooperate with criminals.

Foreseeable Dangers

Chances are, if your business is sued over an injury, the case will involve an accident the injured party claims could have been foreseen. In Illinois, a man who fractured his ankle in a fall on a company's sidewalk was awarded $124,687. He argued that the sidewalk had been negligently installed so it was too steep and that the company had failed to remove a buildup of ice.

In New York, a 74-year-old man won $800,000 after tripping and falling over a depression in the sidewalk at his apartment complex. The housing authority and the tenants' corporation had been arguing over whose responsibility it was to repair the sidewalk, but neither had done so.

In Missouri, a customer was awarded $25,000 after slipping and falling on a wet floor in a retail store. The customer argued that there were no warning signs. Because there was a mop bucket with a "Wet Floor" sign in the area, the plaintiff was found to be only 40 percent negligent, so the award was cut to $15,000.

The key to avoiding trouble in this area is fairly simple: Maintain your property to reduce the chance of accidents, and warn the public of known dangers. If an injury leads to a lawsuit, the court will ask whether the business owner or employees should have noticed the danger and taken steps to correct it. Some preventive actions to take:

• Make sure merchandise displays are safely stacked.

• Avoid tripping hazards by removing debris from the floor and securing carpets and mats.

• Avoid slippery floors by repairing leaky coolers and mopping tracked-in slush and mud. Have employees post "Wet Floor" signs every time they mop.

• Remove snow and ice promptly from sidewalks and parking lots.

• Teach employees how to respond in case of a holdup.

• If a customer acts erratically or shows hostile behavior, call the police immediately.

• If you think a customer might be in danger, provide an escort.