I’ve been sued. Now what?

Alex BarthetContracts, Litigation & Arbitration

Hopefully you can keep construction dispute from moving into the legal arena. But if you are sued or inclined to initiate legal proceedings, here are key things to keep in mind.

First, remember that anyone can sue anyone for almost anything. Understanding this means understanding the critical need to document all issues to protect yourself. In a court setting, documentation carries great weight. Make sure your contracts are in writing, ideally reviewed by a lawyer, and include exact terms, conditions, and exclusions. Email the participants in your project frequently. Also take plenty of pictures of your work and of the project, the happenings on the job and the surrounding area.

Once a lawsuit is filed, the next step is serving it. This usually happens by way of a process server or sheriff coming to your door. A company’s registered agent – often the lawyer, accountant, or company officer that formed the business – is typically the first to be notified of the suit.

After being served, you have 20 days to file a response. Generally, that response will either be filing a motion to dismiss or answering the suit. A motion to dismiss is generally filed because some procedural element is being questioned. The other side has the right to address that reason and amend the suit, and you have the right to file another motion to dismiss. This can happen several times; winning one motion to dismiss might not be enough to keep the case from proceeding.

Some legal filings, such as a 20-day summons to show cause, don’t allow you to file a motion to dismiss. In most instances, however, filing a motion to dismiss or responding to the suit are the two options after being served.

Next is the discovery phase. This is when written questions are sent to both parties by the lawyers. Those questions should be answered within 30 days. Requests for production of records related to the case must be responded to in 30 days.

From there, the case moves to the deposition phase. This is when subpoenas are issued which require third-party witnesses for either side to provide answers to questions under oath. When a witness is deposed, those answers, known as testimony, are transcribed by a court reporter and can be used later in the case.

Sometimes a motion for summary judgement can be filed. This asks the judge, based on all facts and discovery so far in the case, to rule for one party or another on a particular issue. Sometimes the judge can rule on certain counts, or a limited component of the case. But summary judgements for an entire case can be difficult to obtain. If there are disputes as to the factual issues, the judge will deny that motion and the case will continue to trial.

When a trial is set, it can be before a jury or just a judge, and can last from a few hours to multiple weeks, depending on the number of parties and complexities involved in the case. The legal system is very slow. Most cases average 12 to 18 months. If you leave resolution up to the legal system, be aware it will not come quickly. That’s just one factor in why the majority of construction cases settle before trial.

Because of the substantial time and financial commitment involved in going to court, hiring the right lawyer is important. The Lien Zone (Youtube.com/user/TheLienZone) offers guidance on how to find an attorney and meaningful questions to ask prospective lawyers.

When being sued, a prime question arises: What does my insurance cover? In most instances, your general liability insurance covers damages to other property, but not your work product itself. For example, if you are a window contractor and you install windows that the building owner claims are improperly installed and leaking, your insurance will not cover defective windows or bad installation. You may, however, have coverage for the ensuing water damage. The complaint filed should include “damage to other property” to specifically trigger such protection.

Particular kinds of insurance may come into play, such as workers’ compensation, which covers injuries to employees in course of work, or auto insurance, which could cover damaged vehicles. If someone claims breach of contract, such as installing a different material than agreed upon, or not delivering work or materials on time, that would fall outside a general liability policy.

It’s always important to report claims to your insurance company in a timely manner. Sometimes an insurance company will respond with a Reservation of Rights (ROR). This is a statement saying the insurance company has received the claim and will offer a defense while continuing to investigate. Be aware that based on what they find, coverage may then be declined and the defense withdrawn.

A few more helpful points on lawsuits and insurance, based on our experience:

  • If you have insurance, try to obtain a lawyer you trust appointed to your case. The insurance company will procure a lawyer they have a relationship with. But because a relationship with an attorney is very personal, you should be selective. The attorney you choose must be qualified and be experienced in the area of the law in question. He or she must also agree to the insurance company’s billing rates, which are typically much lower than the free market, and must also agree to the insurance company’s billing guidelines, such as electronic format. If the lawyer you prefer can satisfy those requirements, there’s a chance your insurance company will engage that lawyer on your behalf.
  • Even if you have insurance, monitoring the cost of your defense is still important. Your case could impact the cost of your premium at renewal time. You want the most efficient outcome possible.
  • In working with your attorney to steer your case, be a co-pilot, not just a passenger. A lawyer may move on to the next case placing yours on hold. Keep the attorney focused on your case and stay involved in making decisions.
  • A bad settlement is better than a good lawsuit. Settling a case is the best and most efficient way to resolve a dispute. The outcome of a case played out in court may be different than you expect. And no lawyer can guarantee an outcome. If you can settle, do so rather than move forward just because you believe you have a good or even great case.

In defending a lawsuit, you will accumulate legal fees. Can you recover those fees if successful? In Florida, there are three ways to do just that. First, have a written contract that says the prevailing party in a legal dispute is entitled to recover legal fees. Secondly, utilize the bond statute and lien/foreclosure statute, which have provisions for recovering legal fees. Finally, either party can make a formal proposal for settlement. To the extent that this settlement offer isn’t beaten by 25 percent at trial, the court will award the prevailing party legal fees. This encourages settlement and aggressive offers to transfer the risk of attorney fees.

Facing a lawsuit can be unsettling. Retaining records and retaining a lawyer you trust will help you through the process – and hopefully to a good settlement.