You Might Get Sued. Now What?

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Nobody wants to think about being involved in a lawsuit, but it can happen. A customer slips on some wet floor. A vendor delivers faulty product but demands payment. A customer says the product she bought in your store injured her. What do you do now?

Here are five steps to dealing with a current or potential lawsuit:

Step One: Consider paying the demand.

Unfortunately, owning a business sometimes means incurring unwanted expenses, and fending off a lawsuit by paying the claim—regardless of whether you think it is justified—can be cheaper than litigation. For example, Dr. B., a local dentist, sometimes has to return patient’s money even if the problem is not caused by the dentistry, because giving back the money is cheaper than paying a lawyer. An angry customer or client can also make trouble with your licenses or any governing boards. Sometimes it is just less stressful to let the customer be right that to go through the stress and expense of litigation.

Step Two: Look for insurance.

If you can’t soothe the other side, or if it is just too expensive, consider whether you have insurance. For example, you likely have coverage for a slip-and-fall on your premises, and the insurance company will hire a lawyer to defend you. You always want to alert your carrier if you have an incident to ensure you have coverage down the road.

Step Three: Look for indemnification.

Let’s say you sell camping products. You might have an indemnification agreement with the manufacturer that the manufacturer will indemnify you for your losses (including legal costs) for an injury caused by the manufacturer’s product. So if the gas stove you sold blew up when the customer tried to light it, it could be that the gas stove manufacturer will handle the litigation for you. If nothing else, you’ll want the manufacturer to be a party to the litigation because the defect probably was the manufacturer’s fault, not yours.

Step Four: Keep everything.

This is not the time to call the shredding company to take care of your overflowing recycle bin or to really do a good job cleaning out your inbox. Until litigation is resolved, you have an obligation to keep documents and items that could later be admissible evidence, and a lawyer’s view of what is discoverable could well differ from yours. So just hang on things for now.

Step Five: Keep calm and call your lawyer.

Don’t know any local litigators? If you already have a lawyer for any reason—for example, maybe you had someone help incorporate your business—that lawyer may not be a litigator, but chances are that lawyer knows some good litigators. Or you can visit the Arizona State Bar website to search for litigators, or check out the Maricopa County Bar Association lawyer referral service. If you are not experienced in choosing counsel, be sure to ask about the lawyer’s experience doing your kind of case, and feel free to interview more than one attorney. A lawyer can also help you navigate steps one through four, above.

It can be scary and stressful to be threatened with a lawsuit, but if you keep your cool, you will get the claim resolved successfully. Then you can go back to doing what you do best: running your local business!

AmysquareAmy Wilkins is a solo practitioner at The Wilkins Law Firm, where she focuses on business litigation and appeals. She is a Sustaining Member of Arizona’s Finest Lawyers.