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What to Do if You’re Sued: A Practical Guide

What to Do if You’re Sued: A Practical Guide

Guide to fighting lawsuits: maximize the benefit of your small business insurance to minimize the costs to your business.

Thursday, January 09, 2014/Categories: business-liability-insurance

Every IT consultant and network admin worries about being sued. Lawsuits are the "boogieman" of the business world, but like many of the things we fear, they are not very well understood by people other than lawyers. Still, the first step to limiting the damage from lawsuits is learning how they work.

In this guide, we'll help you do just that by answering some basic questions about lawsuits, including…

  • What exactly is a lawsuit?
  • What should you do when your business is sued? 

What Exactly Is a Lawsuit?

A lawsuit is more than just what happens in the courtroom – in fact, lawsuits have many stages. They can take months or years, which is one of the reasons they are so expensive. Let's take a look at each step of a lawsuit.

  • Service of the lawsuit. A process server is someone who delivers notices to people who have been sued. When a business is "served" with a lawsuit, a process server (or uniformed official) typically knocks on your door and delivers a copy of the lawsuit the other party has filed against you.
  • Response to the lawsuit. After receiving a copy of the court papers that detail the complaint against you, you typically have only a few weeks to file a response to the lawsuit. This is "crunch time" for your lawyers, who must write a counter argument and file it with the court.  
  • Discovery. If you've never been sued, you're probably unfamiliar with the discovery process. In this phase, your lawyers submit questions to the other side, receive answers, hire experts to analyze evidence, get access to the other party's evidence, and limit the scope of what can be used as evidence against you.  
  • Arbitration or alternative dispute resolution. Some lawsuits are resolved before they ever go to court. Both parties can agree to go to an arbitrator or mediator, who is an independent third party. The arbitrator or mediator reviews your case, listens to your arguments, and then makes a recommendation to resolve the dispute (such as your business paying the injured party's damages). This process tends to be faster and cheaper than going to trial.
  • Trial. It's not uncommon for a trial to happen as long as a year or two after your lawsuit was filed. When your case finally goes to trial, your lawyers argue your case, present their witnesses, and cross-examine the other side's witnesses.
  • Judgment / settlement. After months or years of preparation, your lawsuit will end in either a judgment or settlement. A settlement occurs when both parties' lawyers agree to a resolution without the help of the judge. This can occur any time, even during the trial. A judgment is what the judge or jury decides as proper compensation for injuries or damages. You can be found innocent, or you could end up having to pay millions of dollars in damages to the other party.

What to Do When You're Sued: A Step-by-Step Outline

As we saw above, a lawsuit is actually a long, involved process spanning many months or years. When your business is involved in an active lawsuit, you have many responsibilities. Let's take a look at what you'll need to do at each step.

  1. Contact your insurance agent. Ideally, you will have contacted your insurance agent before you’re actually sued. Let's say someone falls and is injured on your property. If you have General Liability Insurance, contract your agent immediately. Many policies cover the immediate medical expenses of anyone hurt on your property so they can keep overall costs low. Plus, when you inform your agent of an incident immediately, you set the stage for receiving coverage for your legal expenses in a more timely fashion down the road.
  2. Contact your lawyer. Your lawyer will file a response the lawsuit. Because of the tight deadlines associated with lawsuits, it’s essential to contact your lawyer as soon as you receive notice that you’re being sued.
  3. Filing a claim. When you contact the insurance company, you begin the formal process of "filing a claim," which involves reporting the details of the incident. You supply names of witnesses, dates, copies of contracts, and other key details. The insurance company often sends a "claims adjuster" to investigate the incident, conduct interviews, and report to the insurance company.
  4. Provide evidence for the discovery process. As you prepare to go to court, you'll work with your lawyers, giving them evidence about the case, submitting depositions, and answering questions. The discovery process is long, taking up to a year.  
  5. Adjust internal policies. During this phase of the lawsuit, it’s important to examine what caused the lawsuit. Was it just a fluke accident? Are there steps you can take to prevent a similar one from happening? If someone slips on a wet floor, post signs. If you’re sued for missing a deadline, reexamine your project management protocols and build more cushion into future deadlines.
  6. Attend court / alternative dispute resolution hearings. When the court portions of the lawsuit finally starts, you'll have to attend and, most likely, you’ll be asked to take the witness stand. Your lawyers will coach you. You'll practice with them, learning what questions to expect and refining your answers.
  7. Fulfill the judge's recommendation. If the judge holds you responsible, you'll usually have to pay restitution to the other party. Commercial business insurance can pay for this cost in addition to your lawyer's bills.

As you can see, lawsuits are complicated. They can take years. If you add up all the time you spend preparing your case, it can amount to months of work.

It's important to understand lawsuits so they don't become a "boogieman." You can plan for them. The most important thing to remember is that you need to involve your insurance agent and lawyers immediately. Insurance agents and lawyers know how to contain a lawsuit and prevent it from getting worse. Your first move may be the most important. 

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