Most small business owners are inundated in the daily rigors of meeting the needs of clients, negotiating with vendors, and navigating the ever-changing and complex laws and regulations governing the hiring and firing of employees. Most of us in the small-business community like to believe that by making good decisions, following the rules, and working hard we can avoid becoming entangled in a lawsuit. The unfortunate truth is that sometimes litigation is unavoidable. In the event your business is sued, a basic understanding of the litigation process and some early precautions will save you a tremendous amount of time, money, and frustration in the long run.
1. File a Claim with Your Insurer(s)
The first thing you should consider if you believe that you or your business may be the target of a lawsuit is whether any insurance policies will provide coverage for the claims. Insurance policies often provide coverage in situations that one would not expect. Unfortunately, insurance policies are complex and difficult to understand. In order to determine whether insurance may cover a claim, you should consult with your insurance agent or attorney at the first sign that there may be litigation. The most important thing to keep in mind is this: when in doubt, file a claim. If there is any possibility that insurance coverage applies, you should submit a claim to your insurer. Don’t wait until the lawsuit is filed. Many insurance companies deny coverage if there is any argument that the claim was not filed in a timely manner. If you have a “claims-made” policy, for example, you are required to report any potential claim during the policy period in which the incident occurred even if the lawsuit is not filed until a subsequent policy period. Therefore, at the first sign of trouble, contact your insurer and file a claim.
2. Preserve Records The statute of limitations in Maine for many claims is 6 years. In some circumstances, this six year statute of limitations may be extended. It is not unusual for plaintiff’s attorneys to file a lawsuit on the eve of the statute of limitations, 6 years after the facts giving rise to the lawsuit transpired. Therefore, it is a good idea to compile a file preserving key records such as accident reports, statements, employee counseling memoranda, et cetera if there is a potential claim. Preserving such records may be a burden for small businesses but these efforts can reap massive benefits if litigation is initiated.
3. Stop the Electronic Banter
In the modern age of emails, text messages, and social media, there are countless outlets for informal banter. Fast and easy access to these means of communication lends itself to careless banter that can often land people in hot water. Be aware, if your business is the subject of a lawsuit, all of these emails and texts are subject to production. You will likely find yourself being served with requests, backed by court order, that you produce each and every email/text/etc that in any way relates to the claimant or claim. Attorneys that represent small and large businesses in lawsuits will tell you that this is frequently a source of embarrassment for a company. These messages may be made public and, in addition to affecting the outcome of the lawsuit, can affect your businesses public image. There are several recent notorious examples of this phenomenon. Bottom line: if there is any reason to believe that your business may be the subject of a lawsuit, instruct your employees to cease and desist from carrying on electronic discussions regarding the incident internally or externally.
4. Consult an Attorney
Don’t wait until the lawsuit is filed to consult an attorney. It is human nature to hope that a problem will go away of its own accord and to ignore the problem. A one-hour consultation with an attorney, however, may help to put your mind at ease and give you a better sense for the scope of the problem. Even if a lawsuit never materializes, the consultation can help you to handle any contact with the claimant going forward and will likely make you better equipped to contend with similar situations in the future. Needless to say, if you are served with a lawsuit, immediately call an attorney. Important deadlines are triggered by the filing of a lawsuit. Failure to take timely action can result in your business being prejudiced or even defaulted in the lawsuit.
5. Prepare for a Long Process
A final word of advice: if the claimant does proceed with a lawsuit against your business you should be aware that the process will take several months (and sometimes years) to resolve itself. In Penobscot County, for example, it is not unusual for a year or more to elapse from the filing of the lawsuit to a trial. Most cases settle along the way and do not require a trial. At a minimum, it is likely that you will have to live with the claim for three to six months during which you will be called upon to assist your attorney in preparing the defense.
In conclusion, while nobody likes to think it will happen to his or her business, experience shows that litigation is sometimes simply unavoidable. You must handle litigation with the same care and attention that you handle any important business development. By immediately focusing on the problem and connecting with your insurer, insurance agent, and attorney, you will be well on your way to saving your business money in the long run.