Ifa franchisee files a claim againsta franchisor through arbitration, would a business insurance policy cover the legal fees and/or the damages if the case is lost?

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Ifa franchisee files a claim againsta franchisor through arbitration, would a business insurance policy cover the legal fees and/or the damages if the case is lost?

If a franchisee has reason to file a claim against the franchisor and it must be done through arbitration, would (should or could) a business insurance policy cover the legal fees and/or the damages if the case is lost?

Asked on August 18, 2010 under Insurance Law, Oklahoma

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Business insurance generally covers the following:  property coverage, liability coverage (if, for instance, a customer slips and falls or is damaged by a product you sell), loss of income (like if something happens to the building and you can not operate for awhile), protection for records and retention (business records are important).  There are "specialty" coverages (like equipment coverage for a contractor) that are available for an extra cost.  But a business dispute based upon a contractual dispute is not generally covered.  Read, though, the franchise agreement.  They can indicate that the legal fees and costs of the winning party are paid for by the losing party.  That could be a deterrent to bringing a viable action so cross that out of the agreement before you sign if you can.  If it is in there already ask an attorney in your area about its validity.  Good luck.


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