Shredding of documents can leave a company without insurance coverage. Document shredding has led to charges of obstruction of justice in the Enron affair and contributed to lawsuits over insurance coverage. The Enron/ Anderson case highlights the need for businesses to develop formal document-retention procedures.

Any procedure must recognize that companies can’t be expected to retain all data for extended periods. Lack of storage space will preclude this option for most firms. However, companies should consider retaining important documents for at least six years, because destruction prior to that might be considered obstruction of justice.

The American Institute of Certified Public Accountants notes that because standards for document storage are specific to business type, they’re difficult to regulate. It also points out that the prospect of sanctions and fines under the law doesn’t deter firms from shredding documents that could engender litigation. Quality standards and verification can help prevent business and insurance fiascos.