What to Do if You or Your Business Face a Lawsuit

All you need to start a lawsuit is a typewriter and a filing fee. With tens of thousands of lawsuits filed annually, it is likely only a matter of time before even the best-run companies are sued. What you do before, during and after a dispute can mean the difference between a satisfactory resolution and a nightmare that could devastate your business and even your life.

Before You Are Sued:
In law, an ounce of prevention is worth more than a pound of cure -- it's more like a ton! The best way to win a dispute is not to get into one. Ensure that your company and your employees operate with honesty and fair dealing in everything you do.

An astonishing number of disputes are created by actions that give the perception that the claimant is being taken advantage of. If your clients and customers do not feel they can pick up the phone and resolve any problems with you with a phone call, you have a serious problem that is going to turn into litigation sooner or later.

Common courtesy is one of the best preventatives there is when it comes to lawsuits. Countless injury and accident cases would never have happened if an employee of the defendant had acted with kindness and decency. Instead, too often we see employees being overly defensive, impolite, aloof, or even laughing when a customer is hurt. Money concerns (both reasonable and unreasonable) motivate most personal injury lawsuits. While money, more than anything else, motivates most personal injury lawsuits, the second biggest factor is anger.

Sometimes, accidents and other problems just happen. Businesses and individuals need to be prepared. For businesses, the right business form is key. Operating through a corporation or other formal business structure gives huge advantages to associated individuals who do not want to be held personally liable for the obligations of their companies. Doing business as a sole proprietor, as a DBA, or even a partnership (which some people are in and do not even know it!) puts personal assets and family security at risk. Take a good, hard look at your business while things are going well; consult with qualified attorneys to assist you in preventing problems.

You insure your health, your car and even your life. You need to insure your business too. A commercial general liability insurance policy will cover a wide range of risks; you should not be doing business without one. You also need auto coverage if your business involves driving. And do not forget worker's compensation insurance if you have employees. Remember, insurance not only covers you for the damages claimed against you. Most policies ensure that you are defended by an attorney at the insurance company's expense -- and sometimes you can even select the lawyer yourself.

If You are Sued
Sometimes, you cannot avoid being sued. At the very best, being sued is a pain. At worst, it is a nightmare. So what do you do?

First, as soon as you learn you have been sued, see a lawyer. Do not decide that the service of process upon you was somehow faulty and that you have no need to respond. More people than you can count have gotten themselves into very expensive problems because they listened to a non-lawyer suggest that papers were not served correctly. When you find out you have been sued, regardless of how you have or have not been served, you need to act.

If you are insured, contact your insurance company immediately. Do it by phone then follow up in writing (including any papers you were served with), and save a copy. They should quickly tell you whether you problem is covered under the policy or not. In general, things like accidents are covered claims. Things like contract disputes, fraud and collections actions are not. But always tender the claim to your carrier. They are obligated to protect you unless the claim is absolutely not covered by the policy -- and any ambiguity must be in your favor as the insured.

If you are not insured, or the coverage is denied, or the insurance company "reserves its rights" (meaning it will defend you for now but might not pay any damages against you down the road), or if your insurance company does not get back to you within 72 hours, you need to contact a lawyer. Let the lawyer decide if you have been served or not.

This article does not constitute legal advice and does not establish an attorney-client relationship. Consult an attorney regarding your individual situation.