Protect Your Company Against Misrepresentation Claims

Misrepresentation Claims

When it comes to ethical business practices, misrepresentation is one of the least ethical practices that a business can be involved in. If a client feels as though a company misrepresented its services or products, he or she may file a claim against the company.

Types of Misrepresentation Claims

A client may claim that a business made fraudulent, negligent or innocent claims. Fraudulent misrepresentation is the worst form of misrepresentation. This occurs when a party outright lies to persuade a person to sign a contract. False statements cannot be used to sell a product or service.

Negligent misrepresentation is similar to fraudulent misrepresentation. Often, this happens if someone coerces the signing party into the contract while uncertain about the truth. Innocent misrepresentation, on the other hand, occurs when the person pursuing the contract does not know that he or she is misleading the client.

Protection Against Misrepresentation Claims

When a party files a lawsuit against a company claiming misrepresentation, the company has to pay legal fees to defend itself. Companies can claim that there was no misrepresentation, but they have to be able to prove it. Even if the person who pushed the contract had no idea of the misrepresentation, the company is still liable.

Management liability can protect a company against a misrepresentation insurance claim. Liability insurance pays the legal fees and settlement costs against claims of misrepresentation.