What to Do When Your Business is Sued: A Step-by-Step Guide

Learning that your business is facing a lawsuit can raise a lot of questions. Although your emotions might be running high, you need to approach the situation calmly and methodically. Here's a brief outline of the steps to take when your business is being sued.

1. Don't Panic

   First and foremost, stay calm. Responding to a lawsuit emotionally can lead to mistakes, such as making public statements or social media posts about your case. Without understanding the full scope of the lawsuit, an emotional response might lead you to apologize or admit fault, even if you're not legally liable. Remember, a lawsuit is a formal process, and there are structured steps to handle it.

2. Contact Your Attorney

   Before taking any action, contact your business attorney. If you don't have one, it's time to find an attorney who handles business law cases. They can advise you throughout the lawsuit on the best course of action.

3. Review the Complaint

   Understanding the claim against your business is the next step. Review the filed complaint to determine:

   ▪ Who is suing you?

   ▪ What are the specific claims or damages sought?

   ▪ Are there any deadlines to respond?

4. If Applicable, Notify Your Insurance Company

   Many business insurance policies include liability coverage, which may protect against certain lawsuits.
   For example, general liability insurance covers lawsuits related to third-party bodily injury or property damage, such as a customer slipping and falling on your premises or an employee damaging a client's property. 
   Professional liability insurance covers lawsuits related to errors or omissions in your professional services, such as a consultant giving bad advice or a therapist causing emotional harm. 

   Product liability insurance covers lawsuits related to defects or malfunctions in your products, such as a toy causing injury to a child or a medication causing adverse side effects.
   As soon as you receive notice of the lawsuit, review your insurance coverage. It may cover legal fees, settlement costs, or both, depending on your coverage.

5. Document Everything

   Gather all relevant documents, emails, and other evidence related to the lawsuit. This information will be beneficial to your defense. Organize these materials so that you can easily hand them over to your attorney.

6. Review the Details

   Every lawsuit has a specific timeframe in which it must be filed, called the statute of limitations. If a plaintiff waited too long to file a complaint, the lawsuit may be dismissed in your favor.

   You and your attorney should also make sure the lawsuit was filed in the appropriate court. If not, you might be able to have the case dismissed or transferred.

   With your attorney, you can also assess the merit of the claims against your business. Are they valid, or can they be easily disputed?

7. Plan Your Defense

Next, talk over some defense strategies with your attorney, which will vary depending on the nature of the lawsuit. You may decide to:

• Settle out of court: If it makes financial and reputational sense, consider settling the lawsuit outside of court. This can be a faster and less expensive way to settle the issue.

• Counter-sue: If you believe the plaintiff has wronged your business, you might want to file a counterclaim, which can put you in a better negotiating position.

• Fight the lawsuit: If you believe the lawsuit is without merit or the damages could be high, you may decide to fight in court.

Often, certain defense strategies may be employed together. 

  8. Consider Mediation or Arbitration

Before going to trial, consider alternative dispute resolution methods:

• Mediation: A neutral third party helps both sides come to a mutually agreeable solution.

• Arbitration: A neutral third party makes a binding decision after hearing arguments from both sides.

These options can also be less expensive and quicker than proceeding to trial.An agreement on which a Plaintiff is suing may require use of either or both of these methods at different stages of a dispute.

  9. Stay Professional

Talking about a lawsuit publicly or with employees can backfire. It's better to keep a professional demeanor. Don't make public statements without your attorney.

 10. Prepare for the Long Haul

Lawsuits are very expensive from a time and dollar perspective. Even if you're in the right, the process will take time. Always think twice about litigation, and if you move forward, stay patient and work closely with your attorney to resolve the situation.

 11. In Conclusion

With a calm approach, the right legal counsel, and a clear understanding of your options, you can resolve a lawsuit and make informed decisions to protect your business' future. While the initial shock of being sued might be overwhelming, with proper legal guidance, many businesses can come out stronger on the other side.