Viewing Liability From A Different Perspective

April 15, 2023
Andrew Cove

When you look back at our published blogs, you will notice that we have written extensively about telemarketing compliance. Failing to comply with the Telemarketing Sales Rule (TSR), the Telephone Consumer Protection Act (TCPA), and the Do-Not-Call (DNC) registry has serious financial consequences. Depending on the nature of the violation, those consequences can be catastrophic for your business. 

This blog looks at the immense challenges associated with compliance from a different perspective. For instance, when you talk to a compliance officer, you will likely discover that threats can be both internal and external. Consider the company that is (theoretically) 100% compliant. Their employees are trained in state and federal regulations, have systems in place to identify and stop potential threats, and the leadership sets a strong example. Yet even in this hypothetical scenario, this “perfect” company may still have to deal with other organizations who may not share the same values or focus on the same concerns. 

One of the most significant challenges regarding compliance is that you may have to invite other companies into your circle—which can create more risk. Adopt the mindset that risk can be mitigated but never eliminated. Working with third parties necessarily removes some of your control over the situation. Even so, your business may rely on your relationship with them. Suppose you were to work with another telemarketing company that doesn’t take compliance as seriously as you do. In that case, you must ensure their violations don’t jeopardize you or your business. In short, you need to limit your liability, and to some degree, you can accomplish this through contracts. 

Effective Ways of Limiting Your Liability 

Obviously, there are limits on your control over the outside organizations you choose to work with. When you speak to an attorney who understands business law and contractual language, they will likely suggest language aimed at limiting your liability as much as possible. Put simply, if you venture ahead without a well-drafted agreement, you could be liable for what a third-party company does for you. For example, if a telemarketing company uses an autodialer to contact people on the DNC registry, you could be liable due to your association with them. 

Limitations of liability clauses require some understanding of direct and indirect damages. 

Example:

  • A telemarketing agency sends text messages to people who have not provided consent on your behalf. 
  • The direct damages are the costs you paid the telemarketing agency to work for you and possibly the significant fines associated with the violation. 

Additionally however, there are indirect and consequential damages to consider. This could include attorney’s fees, reputational damage, and lost profits due to the third-party vendor’s actions. Although it may not make sense at first, these types of damages may not be included in the limitation of liability clause. Why? Because, unlike direct damages, they are difficult to quantify at the time when the contract is written. That doesn’t mean that there aren’t ways to recover these damages. 

It is paramount that you speak with an attorney who understands how to craft and negotiate these contracts. For instance, the contract may include a liability cap that limits the amount the other party has to pay for their actions. Arriving at the wrong number or failing to negotiate an appropriate one could have significant financial consequences for your business. 

Get in Touch with Cove Law, P.A. 

We are in the business of protecting and serving people in the telemarketing industry and have been doing so for decades. Aside from counseling clients on contracts, Cove Law, P.A. can assist your company with broader compliance issues and regulatory defense as well. Contact our office today to schedule your free initial consultation.

Andrew Cove
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