Let’s be honest. There’s not a business anywhere that is without problems. Business is complicated and imperfect. Every business everywhere is staffed with imperfect human beings and exists by providing a product or service to other imperfect human beings.
—Bob Parsons (Go Daddy founder)
Businesses exist to provide goods and services to customers, and in doing so they take risks. Among these risks is the chance of losing money in lawsuits filed by customers, employees, and others negatively impacted by the business. Insurance provides some protection against these liabilities, but lawsuits still take their toll. This book covers the subject of economic damages and its role in insurance claims and lawsuits against businesses.
Economic damages are a loss to society that can be usually valued in terms of some market equivalent. As such, economic damages are a reasonably objective and predictable component of liability risk. Business managers and students working toward a business degree can and should get a handle on economic damages as a business liability. This book shows you how, by introducing the relevant economic fundamentals and applying them to a range of lawsuit examples, including business interruption, contract disputes, wrongful employment practices, and claims of personal injury and wrongful death.
My goal is for you to be able to do the following, by the end of this book.
- 1.Identify economic damages as a component of business liability.
- 2.Describe the business risk posed by economic damages.
- 3.Explain the key determinants of economic damages.
- 4.Estimate economic damages and business loss in a variety of cases.
To accomplish these goals, we apply economic principles and some understanding of financial, insurance, and labor markets. We identify roles for statistics and probability to clarify issues of economic damages. Also, the idea of economic damages is part economics and part law, so we need some understanding of legal principles and institutions. It is common these days for economists to discuss legal principles and for legal scholars to discuss economics principles, the confluence of which is the research field known as law and economics. There is even talk of having an economist serve on the U.S. Supreme Court! But I am no lawyer and nothing in this book constitutes legal advice. If you need legal advice, consult a lawyer. Also, the book discusses business decisions as they generally relate to economic damages, but does not contain advice for any specific business faced with a particular liability issue.
This book took much longer to finish than I had intended, and for their great patience and support I thank the folks at Business Expert Press, including Executive Acquisitions Editor Scott Isenberg. I also thank my family (Barbara and Sydney) for their support and forgiveness for stolen nights and weekends devoted to this project.