What To Do If Your Business Gets Sued

If your business gets sued, you should first get in touch with a business attorney. An experienced business attorney will help you navigate the legal process and maintain your reputation.

While a lawsuit is a nightmare for most businesses, there is a high chance of getting sued as your business grows. This is costly and time-consuming, so it is always wise to have a business lawyer on retainer.

There are several reasons why you might get sued. These include:

• Breach of contract
• Premises liability
• Slip and fall accidents
• Intellectual property rights
• Accusations of slander or libel
• Partnership disputes
• Professional liability claims
• General liability claims

Handling a Business Lawsuit

If your business is getting sued, the most important goal should be to settle the suit in your favor. The settlement should also be swift to ensure that you can still focus on generating income.

Service of Process

If your business gets sued, you must be served with process to give the court jurisdiction. Service of process also gives the court the power to decide over the lawsuit and to order the business to pay damages, among other actions.

Simply put, service of process is the delivery of legal documents that give you notice of the legal action that has been filed against your business. It is required by the U.S. Constitution and gives you a chance to respond.

There are various rules on how to go about service of process such as how and to whom the delivery must be made. For instance, services of process can be delivered by hand or mail and can only be delivered to the business owner.

Steps To Take After Service of Process

You will be required to take the following steps once you have been served with the lawsuit papers:

Review the Lawsuit with the Help of a Business Attorney

Once you are served with the lawsuit papers, get in touch with your business attorney to review the case.

Check the service information and caption on the suit to ensure it names the proper entity. If the information is incorrect, your lawyer may move to dismiss the lawsuit.

If it is correct, review the allegations with the help of your lawyer. You may put a preservation order or litigation hold in place. You are also required to save all data that pertains to the lawsuit including documents, email, photos, video, webpages, or voice messages.

It is important to note that you should not communicate with the plaintiff directly. Anything you say about the lawsuit can be used against you.

All communication should be done through your business attorney. If the plaintiff is an employee, you should not discuss the lawsuit.

Do Not Ignore the Lawsuit

Ignoring the lawsuit will not make it go away. Some states have strict deadlines by which you are required to respond to the suit. Failure to respond can lead to a default judgment which is likely to be against your business.

Even with your attorney’s help, the judgment may not be overturned even if the lawsuit is not based on facts.

The court may award the plaintiff one of several actions including freezing your bank accounts or foreclosure on any real estate owned by the business. Such actions can have devastating effects on your business.

Separate Yourself from Your Business

If you are a sole proprietor, it can be difficult to separate yourself from your business. Individual assets such as a car used for business errands can easily get attached to the lawsuit if your business is sued.

However, it is possible to prevent your personal assets from being targeted in a lawsuit. Consider opening a trust which pays taxes and can own property, business, securities, and other assets.

If your business is registered under a trust and gets sued, the only assets that can be targeted are those also registered under the trust.

You can also use incorporation to separate your personal assets from the business. In the event that you lose the lawsuit, your car, home, and other personal assets are safe. However, you must keep up with additional reports, laws, and taxes imposed on corporations by the government.

Inform Your Insurance Company About the Complaint

Business insurance covers you in case of a lawsuit. General liability insurance can protect you from defamation, employers liability can protect you from employee lawsuits, and professional liability can protect you from allegations of financial loss made by customers.

You must promptly forward the lawsuit papers to your insurer to ensure that your coverage is preserved. If the suit falls under what your policy covers, the insurance company will pay for court costs, attorney’s fees, and any settlement awarded.

Always consult with your insurance provider to confirm what your policy covers. Most importantly, do not assume that your insurer will cover the lawsuit. Specific circumstances based on your case may exclude coverage.

Hire a Defense Attorney

Depending on your case, consider hiring a defense attorney specializing in that specific type of lawsuit. If an employee has filed a lawsuit against your business, you need a defense attorney specializing in employer-employee disputes.

Choose a knowledgeable and forthright attorney who communicates promptly. A good defense attorney should provide regular updates, status reports, and copies of all court correspondence and proceedings.

Decide How to Respond to the Lawsuit

Once you have received the lawsuit papers, you have up to 30 days to respond. Your response may be:

• Admission or denial of the allegations
• Defense or counter claims against the plaintiff
• Request a jury trial, an out-of-court settlement, or other resolution

Before submitting a response, ask your business attorney to explain the litigation plan, estimated costs, and alternative exit or resolution strategies. Understand the pros and cons of proceeding with the lawsuit even if you are not at fault.

Failure to respond to the lawsuit could mean the plaintiff automatically wins the case.

Protect Your Business from a Lawsuit

It is critical to have the right protections for your business. For some small businesses, a lawsuit may mean filing for bankruptcy. Most importantly, do not ignore the lawsuit.

Having an experienced attorney can help you come to a quick resolution allowing you to get back to business. Consider settling the lawsuit if it will cost too much time and money to fight in court.