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Legal Immunity

Protecting your Company in the Event of a Lawsuit


You're having a great day at the office. Profits are up, expenses are down, your employees are happy — all is well with the world. Then a nicely dressed man shows up and delivers paperwork telling you that you are being sued. Suddenly, your world isn't so well anymore. The sky is falling and you don't have any idea what to do next.

Hopefully this scenario has never actually happened to you. But the truth is that it could happen because litigation and lawsuits are a common occurrence in small business. The key to surviving a lawsuit is preparation. If you don't think about how you'll react to a lawsuit until the moment you are served with papers, you run a good chance of losing your shirt...or your business.

To prepare for possible future lawsuits, you'll need to establish a relationship with at least three trained professionals: Your insurance agent, your lawyer, and your accountant.

Insurance Agent

If you are sued, your very first call should be to your insurance agent rather than your attorney because you may have insurance coverage for legal claims and not even know it. Most small business insurance policies offer coverage for legal claims under a certain threshold amount. Schedule an appointment with your insurance agent to discuss your current coverage and whether or not it includes coverage for lawsuits. If it doesn't, you really need to consider modifying the policy to include at least some coverage.

Also, ask your insurance agent about the proper procedure to report a claim if you are sued. Nailing down the details now will give you peace of mind later — when you need it most.

Lawyer

After contacting your insurance agent, your next call should be to your attorney. If you don't have an attorney, get one. Look for a seasoned legal professional who has experience in civil cases involving small business clientele.

Once you settle on an attorney, bring her up to speed on your business. Make sure she understands who you are and how your business operates so she knows the basics before she has to defend you in a legal proceeding. It might be a good idea to leave her a copy of your company's media kit for her files.

If your company is sued, you will need to actively cooperate with your attorney throughout the legal process. Your attorney is not going to do everything for you. You will be expected to compile the necessary records and data that will be used in your defense. Above all else, stay in touch with your attorney before and during the legal process. Avoiding your lawyer's calls and e-mails won't make the lawsuit go away. It will just make the situation worse.

Accountant

A lawsuit frequently requires an accurate understanding of the company's financial position, as well as financial documentation related to the case. That being said, it's not uncommon for accountants to play a role in the process. Touch base with your accountant periodically to make sure their records are up-to-date and to red flag any areas that might leave you vulnerable in the event of litigation.