It's no one's dream to find the business you spent years developing on the receiving end of a lawsuit.

What to do if your small business is being sued

January 20, 2016 1:17 pm Published by Leave your thoughts

It's no one's dream to find the business you spent years developing and growing on the receiving end of a lawsuit. It could be coming from a disgruntled employee, client, vendor or even another business. No matter who it is coming from, the results could be costly and time-consuming regardless of outcome, and potentially devastating if not handled correctly.

Keep in mind these simple steps when addressing any pending litigation against you and your business. 

Enlist legal counsel

As soon as you find yourself receiving suit papers, or even threatened with litigation, seek legal aid. Often your limitation papers may have specifications or guidance as to the proper entity or person associated with the issues. Find legal counsel you can trust to help determine the proper course of action. 

Review the lawsuit with your attorney

Once you are served with documents pertaining to the action, save everything. This includes not just the lawsuit itself, but anything you feel might be helpful as evidence to support your case. Make copies and forward a copy of everything to your lawyer.

"It is extremely important that you preserve all records that have any relationship to the case, no matter how tangential," says attorney Krishna Narine. "Such records include documents, electronic material such as email and Web pages, photos, videos and voice messages. If you have a document destruction policy, suspend it until you have consulted with your attorney. In addition, if appropriate, take pictures and/or video and be sure to include identification of the time and date of those images."

Do NOT communicate directly with the plaintiff

All communications between parties in a lawsuit should be handled through legal counsel. It may be tempting to try and save time and money by handling any litigation independently, but this can make things worse or expose you to additional risk. 

"Once a lawsuit has been filed, you should not communicate with the plaintiff at all," say John R. O'Brien, a Chicago-based attorney. "The time for talking things out and resolving issues amicably ended when they filed suit, so all communication should be through your company's attorney."

Inform your insurance provider

As a small business, your insurance should provide you some protection from litigation under certain circumstances. After consulting with your legal counsel, share the details of the litigation with your insurance provider. 

"Most insurance policies require that suit papers be promptly forwarded to the insurer … to preserve any insurance coverage," said David Turner, a partner at Schulten, Ward & Turner. "If the suit is covered, the insurer or counsel retained by the insurer will defend the lawsuit." 

That said, do not assume that your insurance coverage with innately and comprehensively cover expenses related to the suit. 

The most important thing you can do is enlist solid legal counsel. The business lawyers at The Law Offices of Donald W. Hudspeth, P.C. have years of experience and will make sure you have the resources and information you will need to fight your case. 

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