What Should You Do if You Get Sued?
When you own a business, getting sued is not a matter of if, it’s a matter of when. The more successful you are, the greater the chances that someone will file a lawsuit against you or your company.
That’s why you need to know what to do before you hear that dreaded phrase: “You’ve been served.”
First and most important: Don’t panic. Stay calm and take purposeful and immediate action.
Here’s what you should do—and you should do it immediately (the same day if possible) after you are served:
- Read the lawsuit. You need to know who is suing you and what they allege you did or did not do. The summons will tell you the exact number of days you have to respond to the lawsuit so you know what your deadline is.
- Call your attorney. Even if you believe that your insurance company is going to handle your defense (more about that later), your own trusted legal advisor should be notified and kept advised as the case progresses.
- Put your insurance carrier on notice. Let your commercial insurance agent/broker know you have been served with a complaint. He or she will give you instructions on how to notify the insurance carrier and may assist directly in placing the carrier on notice of the claim.
Important! Regardless of the nature of the claim or claims alleged in the complaint, never assume that your insurance doesn’t cover that type of claim. Notify your carrier even if you think it’s an uninsured risk because you could be wrong. Let your insurance carrier tell you whether some or all of the claims asserted against you are covered under your policy.
Designate a Point of Contact
Once you have contacted your attorney and placed your insurance carrier on notice of the claim, you should designate an individual within the company to be the primary point of contact for all things related to the lawsuit.
Your internal point of contact should be a C-level or department-head person who reports to the CEO. This person should have the necessary authority as well as the time and ability to deal with the lawsuit. It should not be the CEO; the CEO needs to stay focused on running the company.
Upon receipt of a complaint, meet with all of your department heads—particularly your IT department head—and put procedures in place to securely preserve all data which might in any way relate to the lawsuit. Contact a business litigation attorney if you’re unclear on any detail about your obligations and the process for preserving evidence. The failure to preserve data can have significant negative implications for you in the litigation.
A standard insurance policy issued to business entities will protect them against liability claims for:
- Bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations
- Advertising liability
- Personal injury (PI) liability
Risks related to contracts and business relationships with partners are usually not insured.
You may choose to purchase additional coverages such as employment practices liability, which provides coverage to employers against claims made by employees alleging discrimination (based on sex, race, age or disability, for example), wrongful termination and harassment, as well as other employment-related issues, such as failure to promote. The terms of your policy dictate whether claims or losses are covered.
When it comes to lawsuits, there are two significant components to insurance:
- Providing a legal defense
- Paying any damages.
Upon receipt of your claim, your insurance carrier will take one of three actions:
- Advise you that the claim is covered and the insurance carrier will provide a defense.
- Advise you that the insurance company believes that the claim may not be covered under your policy and they are going to reserve their rights to deny coverage later, but they are currently going to provide a defense.
- Advise you that the insurance company is denying coverage for the claimed loss and that they are not going to provide a defense.
Once you have a statement from your carrier on the status of coverage, you will know what you are facing.
The Value of Business Counsel with a Knowledge of Insurance Coverage
As counsel who has experience in business litigation and insurance coverage, we can be a crucial resource to you from the moment that you are served.
Having a knowledgeable attorney involved in the communications with your insurance carrier can influence the carrier’s decision in close cases. Additionally, if you find yourself with a limited amount of coverage, we have had success in getting insurance carriers to assign us as litigation counsel. That way, you can utilize the insurance dollars to defend, and maybe settle, the claim up to the amount of the coverage, and then transition to the self-paid defense of the claim with counsel that you know and trust.
We can also assist you with understanding and evaluating your various layers of insurance coverage in advance of a claim. This is a service we routinely provide our clients. We’ll help you be sure you have the right coverage in the right amounts to cover both defense costs and damages. We’ll evaluate coverage limits, overlapping coverage, excess coverage (which picks up the cost of risks you’re not otherwise insured for), deductibles and more. Even though you may have a knowledgeable, trustworthy agent, it’s worth having someone who knows what’s happening in the legal world take a look at your situation.
To schedule an insurance coverage review, call our office at 407-660-2964 or email Calla Hoornstra at email@example.com.