A lawsuit without solid grounds – sometimes called a "frivolous" or "meritless" lawsuit – is like sand being thrown into the gears
of your business. These lawsuits are based on shaky evidence and arguable interpretations of the law, but they nevertheless take time and money
to resolve. The average frivolous lawsuit costs businesses $2,000 to $5,000 before it's dismissed, according to a report [PDF] from the U.S.
Chamber Institute for Legal Reform. That's no chump change.
Luckily, General Liability Insurance can help cover some of the costs associated with frivolous lawsuits. TechInsurance has helped thousands of IT professionals find similar coverage since 1997. Keep reading
to learn more about how the right insurance policy can protect your business.
Small Businesses: Targets for Frivolous General Liability Claims
Imagine that you never make a mistake in your entire IT career. You never do anything wrong, you keep your business and all your employees
safe and happy, and you display a skilled understanding of every client project. You're the picture of perfection.
Could you still be sued?
"When it comes to meritless lawsuits, which often come in the form of general liability claims, no segment of the country is hit harder by
this vexing problem than small-business owners," says
David J. Oberly,
attorney at law firm
Marshall Dennehey Warner
Coleman & Goggin.
"Small businesses are a primary target of frivolous actions," Oberly says. "The plaintiff's lawyers understand that [a small business] –
which often lacks the resources to defend itself – is much more likely than its large corporate counterpart to immediately settle a
Remember how you did nothing wrong in your perfect career? That doesn't matter. If an unscrupulous person decides to, they can launch what
Oberly calls a "see what sticks approach" to filing claims, hoping to score a quick buck from the settlement.
General Liability Insurance May Cover Certain Frivolous Claims
If you have commercial General Liability Insurance, you're off to a good start. Most frivolous lawsuits tend to be over third-party General
Liability claims – bodily injury, advertising injury, or property damage. Your General Liability policy is designed to cover these claims,
whether you are liable or not. It can help you pay for the legal costs to resolve these claims, including:
- Attorney fees.
- Court costs.
- Settlement or judgment expenses if the case isn't dismissed outright.
Resolving a Frivolous General Liability Lawsuit
If you have a General Liability policy, contact your insurance agent or provider as soon as you know about a claim or a potential claim. They
can help you get an attorney to guide you through the rest of the process.
To help explain, we reached out to attorney Frederic Abramson, principal of Frederic R.
Abramson P. C., who runs the New York Business Law Blog. His response is geared to New
York law, but the general steps are similar across the United States.
1. Draft a motion to dismiss.
"When a party is served with a lawsuit that is frivolous, the first step is to draft a pre-answer motion to dismiss for failure to state a
cause of action," Abramson says. Then, the plaintiff and his or her attorneys get a chance to respond. "In New York, opposing counsel has 21 days
to oppose the motion."
2. The plaintiff answers the motion.
After a motion to dismiss is filed, the case is sent to a judge. "Depending on how busy the judge is, the motion is usually decided within 30
days, or they will schedule an oral argument, usually within 60 days," Abramson says. "The judge may dismiss the case at oral argument, or you
may have to wait for a decision. Depending on the judge, the time varies greatly. Usually there is decision within a week. However, I have waited
over six months on occasion."
3. The judge decides on the motion to dismiss or holds an oral argument to make the decision.
"If the court denies the motion, the motion is not considered frivolous, and then you would have to defend like millions of other cases,"
4. If the case isn't dismissed, you go to court.
"Whether a party will be successful in prevailing on dismissing a 'frivolous lawsuit' depends on how strong a defense you have,”
Abramson says. "For example, if you have case law showing the same facts in the same jurisdiction, you are very likely to prevail."
You can probably guess that this process, and a strong defense, doesn't happen for free. "In New York, most attorneys charge between $300 and
$700 an hour," Abramson says. He adds that an average motion takes around eight hours to draft, and each court appearance takes about three
hours. Now you can see where that $2k-to-$5k figure from earlier comes into play.
Fortunately, technology insurance policies like General Liability Insurance can help pay for these costs.
How TechInsurance Can Help
TechInsurance is the leading online agent in the U.S. for IT freelancers, small businesses, and independent contractors. Since 1997, we have
helped more than 100,000 IT professionals find the insurance coverage they need, including General Liability coverage.
If you need a General Liability policy, just fill out our hassle-free online application and
receive competitive rates from multiple insurers. If you have any questions along the way just give us a call and you will be connected to one of
our expert agents.