Small Businesses: What To Do When You’re Being Sued

Small Businesses: What To Do When You’re Being Sued

According to the Small Business Association, around 36% to 53% of small businesses deal with at least one litigation in any given year. Regardless of how good your company is doing or how careful your team is handling customers, there’s still a possibility of you getting sued.

Whether you win or lose, any lawsuit can cost your business a lot of money. However, things could worsen if you have no idea how to deal with it or ignore the complaint. This article will talk about what you can do* if you or your business is getting sued.

Work With A Business Attorney To Review The Case

After officially receiving the complaint and the suit papers, your best course of action is to review the case with an experienced business attorney.

Together you can review the caption and service information provided on the lawsuit to ensure that the proper entity is correct. If some of this information is incorrect, you can work with your attorney to dismiss the action.

If the details are correct, you should continue reviewing the case and put up a preservation order or litigation hold. This will compel the company to preserve all data that is related to the legal action. Keeping all records relating to the case is vital since some may prove helpful somewhere down the line.

At this stage, you should never contact the plaintiff or attempt to resolve the issue on your own. Anything you say regarding the lawsuit can be used against you. Any form of communication with the plaintiff will need to be done through your company’s attorney.

Inform Your Insurance Provider

If your business has existing policies, you should inform your provider about the case as soon as possible to discuss coverage. There’s a wide variety of insurance policies that exist to cover businesses and professionals from lawsuits.

The cost of E & O insurance for insurance agents or general liability insurance for retailers will be worth it at this stage. These policies often cover the attorneys’ fees, court costs, settlements, and even judgments where you’re found liable.

It’s best to have your insurance documentation ready for smooth processing. Some insurance providers will also require that the suit papers be forwarded to them to ensure coverage.

You also avoid assuming that your insurance will cover everything. Most lawsuits are often covered by policies like a general liability insurance. However, do not always assume this is true. Take the time to discuss the coverage with your insurance provider. This should help you confirm which part of the lawsuit is covered by the policy.

Decide On How To Respond To The Complaint

After receiving the lawsuit, you are required to provide a written response within 30 days. This deadline may vary depending on the state your case is in. A response generally includes the following:

  • A defense or counterclaims against the plaintiff
  • Admittance or denial of the plaintiff’s allegations
  • Asking for an alternative resolution (out-of-court settlement) or a jury trial

Your official response will have to depend on everything you have reviewed with your business attorney. It’s essential that you understand the exact nature of the claims so your team can make an informed decision moving forward.

For example, if your team found a way to settle the dispute through financial or nonmonetary means, that might be better than the litigation costs.

Discuss the pros and cons of going forward with the case with your legal counsel. While you may be wrongly accused, there are certain situations where it’s in your company’s best interest to simply settle than proceed with the litigation process.

Regardless of how you wish to proceed, make sure to have your lawyer check your response before sending it to make sure that every aspect of the case is addressed.

What you should never do is ignore the case. If you failed to respond within the required time frame, the plaintiff is given the right to file a Request For Default. You will be provided another 30 days to respond. Failing to respond to that means the plaintiff automatically wins the case.

Bottom Line

There are various effective ways to help reduce the volume of litigation that your company gets, such as training and seminars. However, there are times that you have to face lawsuits head-on. With the assistance of an effective attorney, you’ll be able to overcome these challenges and go back to focusing on growing your business.

*Please bear in mind that this article does not replace legal counsel. If you or your business is currently being sued, we strongly recommend that you consult an attorney before taking any action.

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