What to do if you get sued.

If you should receive a lawsuit, do not panic.  If you are in business, odds are someday that you will be sued by either a customer, vendor or someone that you are doing business with. 

The litigation may result from a claim of damages due to failure to delivery a product, breach of contract as to performance of the terms of the agreement, or failure to pay for a product.

If you receive a lawsuit, you have 30 days to respond to the litigation (if in state court in California) or 20 days if in federal court.  A response may not only be an “answer” but may be a response by way of a demurrer seeking to have the case resolved without going forward as there is no basis to the litigation.  The time frame can be continued by stipulation between attorneys or by way of a motion with the court.

It is important to remember, that if you have a business (corporation or a limited liability company) you MUST HAVE AN ATTORNEY.  A corporation or limited liability company cannot represent itself in court. 

The first thing that should be done, is to determine if there is insurance that would cover the claim so that your insurance company will provide coverage.  Usually if there is a claim based upon some type of injury, there will most likely be coverage under general liability insurance.  Be sure to notify your insurance company timely, if you fail to do this, you could end up waiving your coverage.  If there is coverage, the insurance company will evaluate coverage and appoint an attorney to handle the case.  Depending on your regular attorney, your insurance company may be willing to allow you to continue to use your regular attorney, who will have to agree to a rate that the insurance company is willing to pay.  In sum cases, you may have a potential for liability exceeding the coverage, or for non-covered matters, and you may have to engage your own attorney to oversee the litigation.

All events need to be calendared so that no dates are missed, so that you do not have problems with the Court or have sanctions imposed. 

In evaluating the litigation, your attorney needs to determine if you have a cross complaint to be filed against a third party for responsibility as to any claim, in essence seeking indemnification as to the claim.  This will need to be served on the other entities or persons to protect yourself.  We have had clients state that they do not want to file and action against someone else due to the relationship, but the failure to do so, could result in a waiver of your rights and the ability to protect your company and/or yourself.

Once the parties have all been served, filed answers, the case is at issue and then discovery begins.