-Partners in Practice -

The odds against being sued are not all that good. Four firms in ten can expect the unwelcome delivery of a Summons and Complaint within the next year. The allegations may be without merit; they may leave you frustrated and angry. They have to be answered, nevertheless.

Suppose, for a moment, that the odds get the best of you, and you find yourself named in a lawsuit you should never have been part of in the first place. The allegations are outrageous: Negligence, breach of warranty, design of an inherently unsafe product, misrepresentation, and fraud. In the face of these carefully crafted intimidations, you need to remain calm and act rationally.

First, you are going to have to regain your composure. It will help if you are prepared for the chain of events likely to follow. Questions you may never have thought to ask suddenly become important: Do I have to sign for receipt of the Summons? Are we covered? How can we possibly deal with all this in the short time we have to respond?

If a Summons is served in person, you have little choice but to sign the acknowledgment of receipt. Sign it, but be certain you record the date, for it has important legal and insurance implications. The standard 30 days to respond begins to run on the date of service, and that date may well determine the applicability of coverage under a "claims made" policy form.

If you receive a Summons in the mail, it is likely to be accompanied by a demand from the plaintiff's attorney that you sign the acknowledgment of receipt and return it within 20 days. You can take a certain amount of satisfaction in the knowledge that you have no obligation to do so. In fact, it is best that you do not.

What you do need to do, in either case, is notify your insurance broker immediately. Forward a copy of the Summons with a transmittal memorandum, and keep a clear record of the date the claim was reported. Even if you discover only by chance that you have been named in a lawsuit, call your broker. Then seek to obtain a copy of the papers from a friendly information source.

You can rely on your broker to advise you on appropriate next steps and to caution you against actions that might best be avoided. As promptly as the circumstances dictate, your broker will report your claim to your insurer and seek to establish communications between you and the company's claims representative. He or she will also serve as your advocate with your insurer or defense counsel should advocacy be required.

Your broker may advise you to take photographs of conditions on the site before they change, or to draft a chronological sequence of events leading up to the claim. Some lawsuits have a way of dragging on for years, and a factual account compiled while the details are still fresh in your mind could be of vital importance later when key people are scattered and memories fade.

Knowledgeable brokers intuitively understand that there is often an inclination among professionals to discover errors or omissions after a claim has been made. The tendency is to quickly accept blame. They will advise you not to admit or even imply fault and will caution you against responding to overtures from the plaintiff's attorney without involving your carrier--even compromises or remedial measures that may be proposed in good faith. A premature concession on your part could not only weaken your position, but it could jeopardize coverage under your policy, as well.

Once your claim has been reported, you should receive a prompt acknowledgement from one of the company's claims representatives. Some carriers are better about this than others. Those that are will respond immediately, often by telephone if the situation so warrants. Others will go through a more time-consuming process of verifying coverage before responding.

Most often, the issue of coverage is not easy to determine at the outset. The allegations are normally all-encompassing, and if some are excluded under your policy, others generally are not. In the face of uncertainty, your carrier is likely to go ahead and appoint an attorney for your defense, but it may reserve its right to deny coverage under the policy until the facts are known.

If you are insured with a carrier which is reasonably flexible on the selection of counsel, your broker will seek to have the file assigned to the attorney of your choice. The last word on this issue, however, belongs to your insurer, and some will adamantly refuse to work with attorneys who are not on a pre-approved list.

Once counsel has been appointed, your communications are likely to be directed to the attorney who has been assigned to your defense. The company claims representative will participate in the development of defense and cost containment strategies. One such strategy may be simply to settle and get out. This can be the most misunderstood and frustrating aspect of the entire process.

Under the terms of your policy, your carrier cannot settle a claim without your consent. There is a hook, however, and it is this: If your insurer concludes it to be advisable to settle and put an end to the rising costs of defense, and if, for whatever reason, you refuse to go along, the risk of an escalation in cost is yours. This, in most cases, does not leave you with much choice.

The problem stems from a dichotomy of values. The carrier, having exhausted all of the relatively inexpensive tactics that might lead to your early dismissal, will weigh the risk of continuing to defend against the cost of settlement. It is strictly a business decision, and if a buy-out can be effected for $2,500, you can be certain the settlement option will be chosen over the $50,000 cost of taking the issue to court.

This may strike you as unreasonable. On one hand, you are concerned about your professional reputation, in spite of the fact that the settlement will be made with no assessment of blame. On the other, your deductible is on the line, and you may well view settlement as an altogether too easy capitulation in the face of what appears to be little more than legal extortion.

It is at this point that remaining calm and acting rationally is more important than ever. In reality, the settlement will have little, if any, effect on your reputation. Very few people will ever know about it. That the civil justice system in the United States is long overdue for reform is a widely accepted proposition. It is not, however, an issue to be debated in the context of a decision which has to be made before the end of next week. That decision is as much a business judgment for you as it is for your insurer, and, very often, the best option you have is to settle the claim so you can turn your attention to more rewarding pursuits.

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
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