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What to Do When You’re Facing Legal Action



Every small business owner hopes that they will never have to deal with a lawsuit against their company, but if the day comes when you are sued by a customer, client, supplier or employee, you need to manage every stage of the process with caution. It will be an emotional and in all likelihood a costly experience, but the aim is to get through it with minimal expenses and with your business’ reputation undamaged.

Tell Your Insurance Provider

As a business, you should already have adequate liability insurance in place to ensure that in situations such as this, you are covered for legal defence. If you don’t have insurance, contact Hiscox today for a business liability insurance quote.

Your liability insurance provider needs to be made aware of the lawsuit as some actions may be covered in your policy. For example, suits from employees can be covered by employer’s liability insurance. It would cover your attorney’s fees, court fees, and, if you are found to be liable, the settlement. Not all types of lawsuit will be covered, so make sure you find out where you stand as soon as possible.

Find an Attorney to Review the Lawsuit

When you have received the papers, the first step to take is to review them with a business attorney. They may be able to find grounds on which to dismiss the lawsuit altogether. If there are errors in the caption and service information. Assuming that there are no errors, you will need to place a preservation order or litigation hold which requires that you preserve all data and records related to the allegations. Don’t communicate with the plaintiff directly – all communication should be done through your attorneys. If you still work with the plaintiff, you need to make it clear that you cannot discuss the case.

Submit Your Response to the Lawsuit

You will have a deadline by which you need to submit a written response. The time you have to respond will be different depending on the state, but it’s often within 30 days. Don’t miss the deadline as it will mean that the plaintiff will win by default. It’s a statement which includes whether you admit or deny the allegations, your defenses and/or counter claims, whether you want to go to a jury trial or reach an out of court settlement. In some cases, your attorney may be able to file a motion to dismiss the case completely, which a judge will either deny or grant.

Hire a Defence Attorney

If the case is going to court, you will need a defence attorney. Your company or your insurance provider may provide one for you. But it’s often best to find an attorney with experience in the particular type of lawsuit you’re dealing with or the court it will be heard in. Testimonials from previous clients can help you to identify the best lawyers. But make sure they are a good communicator and ask as many questions as you need to in order to feel comfortable.

During the Case

Once the litigation process has begun, it’s important to be honest with your lawyer and to respond quickly to requests for information or payment. Being late with payments can result in extra charges. It is likely to be a stressful time, but try to focus on running your business to the best of your ability. Letting standards slip will damage your business even more than the lawsuit has already.


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