Oh Great, A Lawsuit. Now What?

December 26, 2014

As a small business owner there are fewer things capable of striking more fear into your heart than being sued. Even in a best-case scenario where you have professional liability insurance, general liability coverage, or a business owners policy in place, a lawsuit still means lost time, stress, and possible damage to your reputation.

Regardless of whether you have small business insurance or were at fault, here are four steps you can take if your small business is sued. They might improve the situation, maybe even dramatically.

1) Do not admit fault

You may feel like your business caused the problem, or that you could’ve prevented it, but do not say that to anyone other than your attorney. Even if you’re partially at fault, by verbally or otherwise assuming responsibility you’re setting yourself up to be held fully liable. For most lawsuits you’ll need to retain an attorney, so let them do the talking for you.  Attorney representation is part of your small business insurance, so take advantage.

2) Keep your purse strings closed

Once a problem has escalated to the point of lawsuit there’s nothing positive you can achieve by offering payment. In fact, paying for repairs or damages can negate your insurance coverage, and once something has been fixed or worked on it’s impossible to identify the extent of the original damage. This applies to property damage, bodily injury, and malpractice cases equally.

3) Save everything

You’re probably saying, “No kidding.” But how many times have you reached for a business card or looked for an old invoice, only to come up empty-handed? Having a file dedicated to the legal action is a solid first step, but can’t prevent you from misplacing something, and isn’t fire-proof. Back up your physical records by snapping photos of all documentation and backing them up to the cloud.

4) Reach out to the plaintiff

If you have an attorney or insurance coverage that provides one, you’ll likely be told to not contact the plaintiff and to leave communication to your lawyer. This is the best advice. But in some instances – especially if you don’t have any small business insurance – it can’t hurt to request a coffee meeting. By offering the proverbial olive branch you regain some control, a lot of composure, and the possibility that you can work it out on your own.

There’s always the chance that your small business could be sued, and while these tips will help you navigate such a situation it’s always better to have legal protection. If you’re not protecting your business with small business insurance, now is the time to change that. We can help.