I’ve Been Sued. Now What?
Don’t panic – anyone can sue anyone
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.
Getting served
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.
If you’ve been sued, you likely received a subpoena for deposition during the litigation process. A deposition gives the lawyer and the client their best opportunity to examine witnesses and gain a better understanding of the claims and defenses in a matter. They can do so while gauging both the level of the witness’s knowledge as well as his or her demeanor and effectiveness as a witness. If the subpoena is directed to a particular individual, it is that person that will need to appear. However, if the subpoena is directed to a company, the question of who needs to appear may not be so clear.
The rules of procedure in most states governing such depositions generally provide that when a party names a public or private corporation as a deponent, it must then describe with reasonable particularity the matters on which examination is requested. The company so named then has an opportunity to designate one or more persons with knowledge on such matters and have them testify on its behalf.
This rule was designed to avoid what had been the all too common situation of taking a seemingly endless stream of corporate representative depositions where each witness disclaimed any knowledge of the facts sought. By describing exactly what the examiner wanted to know, the company being deposed could identify and produce its most knowledgeable representative.
Some companies have attempted to interpret this as a shield to protect potential witnesses from examination, understanding that the choice of who within the entity may be deposed is the company’s alone to make through this internal designation procedure. They would argue that the examiner can only notice the entity generally, after which it is the company’s sole decision as to whom to produce for the deposition. But this interpretation has generally been rejected, particularly where discovery has otherwise indicated that an identifiable witness within the company may have the specific information the examiner is seeking.
The rule does provide protection to a company from fishing expeditions by overzealous or harassing opponents. While an examiner is not mandated to follow the designation procedure and may name specific individuals within a company for deposition, if it is shown that such depositions create a needless burden on the company, a court can require that the company designate that representative it concludes is the most knowledgeable in the areas of inquiry specifically described by the examiner.
Clearly, being aware of the current state of the law in this area can yield significant advantages.
20 days to file a response
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.
Discovery phase
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.
Deposition phase
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.
What does my insurance cover?
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.
Legal fees
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.