Getting sued is one of most the nerve wracking experiences that one can have. There is even psychological phobia caused by the fear of getting sued called liticaphobia. Obviously, there are things that we can do in our personal lives and our business to limit our exposure to lawsuits, such as driving carefully or work hard to make your customers happy. However, no matter how hard we try, ultimately, you may still end up getting sued.
The advice below is a non-exhaustive list of things to remember when you believe that you might get sued. Although this blog is focused more on business owners, generally, this advice applies to homeowners worried about getting sued by a neighbor, or drivers that have been involved in a traffic accident. Although it is not mentioned here, the best advice I can give someone who is about to get sued is this–don’t panic.
- Save Your Documents
Most business transactions involve contracts, work orders, and receipts. When a customer or supplier makes a claim for breach of contract, the most important information to know is, “What does the contract say?” If the services were provided without a written contract, then the case gets bogged down with both parties claiming that the contract meant one thing versus another. Ultimately, the only way to determine what the terms of the contract were is to let a jury decide. This is never a good thing.
If you are in the business of providing goods and services, then you need to have all of your business transactions in writing. Your contracts should state the names of the parties, what goods or services are being provided, when they will be provided, the payment terms of the contract, the penalties for terminating the contract, and the remedies if there is a breach of contract amongst other considerations. A lawyer can sit down with you and discuss these issues and draft a contract that meets your business needs.
Once you have written contract, though, it’s important to keep a copy of it. Otherwise, we are back to a he said/she said situation that ultimately the jury will decide. In addition to the contract, make sure to save all email and text message communications between you and your customers/suppliers. These documents are essential, and they will form the backbone of your legal defense.
2. Talk to Your Insurance Company
A good insurance agent is as important to a business as a good lawyer. A good insurance agent will sit down with you to discuss the potential liabilities that are faced by your business and take the time to make sure that the potential claims made against you are covered. A bad insurance agent will sell you the first policy he finds, take your premium check, and wait until next year to call you again. Hire a good insurance agent.
Once you have received notice that you may be sued, you need to contact your insurance agent so that he may give notice to the insurance company. Obviously, the most common insurance policies that individuals own are car insurance, homeowner’s insurance, and a title policy on their home. For businesses, insurance can get more complex with policies that cover the general operations of the business (Commercial General Liability “CGL”), worker’s compensation coverage or an employers’ liability policy, motor vehicle coverage for business owned automobiles, and many other coverages. Each of these business policies will have different coverages and different exclusions. Again, it is very important that you hire a good insurance agent.
The good news is that if your insurance policy does cover the claims being made against you, your insurance company will provide you with an attorney to defend the case against you, and they will pay any judgment against you (up to the policy limits). All you as the insured will be required to pay is the deductible for the claim. If the claim is not covered by the insurance policy, then it is definitely time to contact an attorney if you haven’t already.
3. Contact an Attorney
This step can actually be your first step of your journey dealing with a potential lawsuit. In fact, if you really are just out in the weeds not knowing what to do, I would recommend that you contact an attorney first. The advice you get should be similar to what is provided above.
This is a good idea when it appears that there will not be any insurance coverage because the claims being made by the other party are not covered by insurance. (For example, generally speaking, claims for breach of contract are not covered by insurance.) Also, there are times when your insurance company will agree to defend the lawsuit against you, but will not cover the damages against you. In this situation, you need a lawyer to look after your interests as it relates to the insurance coverage.
When looking for a lawyer, there are a couple of things to consider:
(1) Is this the kind of case the lawyer handles? If someone calls me and asks if I can represent them on a divorce case, my answer will be no, but I can refer you to someone. I don’t handle divorces, and no matter what the client offers to pay me, I will not represent a client on a divorce case. Make sure that your attorney actually handles the type of case you have.
(2) Does the lawyer have the experience to succeed in this case? Experience comes from both the number of years that the lawyer has been practicing law, but also the number of times an attorney has done a task. This can be difficult to judge. I remember a few years back when I was practicing criminal law, I watched a trial being handled by another criminal defense lawyer. This lawyer probably had 30+ years of experience trying criminal cases. However, when it was his turn to cross-examine the witness, he couldn’t ask a basic question. The lawyer had plenty of experience, but it was wasted because he couldn’t ask a question.
3. How comfortable are you communicating with the attorney? This may be the most important factor in determining whether to hire an attorney. Lawsuits take time. Before Covid-19 happened, the average time from filing a lawsuit until trial was about 12-18 months. After Covid-19, the wait times are even longer due to a backlog of cases. Understand, you will be communicating with your lawyer for a long time. Your lawyer doesn’t need to be your best friend, but it needs to be someone you can communicate with and trust.
4. Do Not Avoid Service
This may sound like a pretty basic thing to say, but it must be said. Years ago, I represented a home builder who got into a dispute about the quality of the work one of his subcontractors did on house. The contractors hired an attorney, and the attorney sent a certified letter to my client in accordance with the Texas Property Code. My client figured if he didn’t pick up the certified letter, then he could avoid being sued. That’s not how it works.
Instead, the lawyer for the subcontractor filed a lawsuit anyway. A dispute that could have been resolved relatively easily was now a lawsuit with two lawyers gearing up to fight. This ended up costing my client more money. The Texas Rules of Civil Procedure provide a number of ways to serve you and your business with a lawsuit. Don’t try to be clever and avoid service. Just accept the lawsuit and call your attorney.
5. Discuss Your Budget with Your Attorney
Defending against a lawsuit is not cheap. There are attorney’s fees, expert witness’ fees, and various case costs. It’s impossible to know for sure how much it will cost to defend the case all the way through trial, but your attorney should be able to give you an estimate through various points of litigation (answer, discovery, mediation, and trial).
Often when someone gets sued, they get angry and they want revenge. However, it is important to understand that if you own a business, getting sued is just one of the expenses that come with operating a business. Having an estimate of what it will cost to go through trial will help you decide if it is worth it to go forward. For example, if you are being sued for $10,000.00 and your lawyer tells you that it will cost $20,000.00 to defend the case, then you and your attorney need to talk about settling the case, even if you did nothing wrong. That’s not a fun conversation to have, but it is an important one.
If you have any questions regarding the information in this post or any other legal questions, please feel free to call me, Shaw Clifford, (281) 794-3738