Protecting Yourself From Lawsuits
Just in case you haven't heard, most lawyers are a pain in the ass and all lawsuits suck. If this is news to you, get down on your knees and thank God that you haven't yet learned this lesson.
One of the toughest truths in business is that you'll be involved in litigation. It's going to happen, no matter how cautious you are. I speak from experience. While we've only been involved in a few lawsuits, and it took seven years for our first, they've been difficult experiences for me. What I can tell you is that if you work in business, they will happen, and with each one, they get easier and easier to stomach.
The sooner you understand that it's going to happen at some point, the easier it will be to deal with it when it does happen. Don't get me wrong -- when it does happen, you'll be shocked, angry and scared, but you will get through it. What follows are six steps you need to take to protect yourself and keep the angst at a minimum.
1. Get, and keep, a good lawyer.
Whether your involvement is as a plaintiff, defendant or third party, you need to know a few things. First, there are a lot of rules and procedures in play and unless you're a lawyer, you probably have no idea what they are. That's okay, but you need to call your lawyer immediately. If you don't have one, get a good one, NOW. Get a referral from someone who knows many and take him/her to lunch twice a year (even with no lawsuits) to keep in touch. Make sure your lawyer knows your business and industry so that if something bad happens, you're not starting at square one. If that bad day comes and you need a specialist and your attorney can't do that work (say real estate law, for example), they'll refer you to someone who can help you. (Throughout the process, work with your lawyer to keep your costs down. I won't go into that here; there are tons of books and articles on ways to do it.)
2. Get professional liability insurance.
If you are a defendant or are a third party in a lawsuit, you should also call your insurance company to see if your professional liability insurance will cover the suit. Don't have professional liability insurance? GET IT. You'll pay a lot for it, in most cases, but it's worth it to sleep at night. One key, be sure to call as soon as the suit is filed -- most insurance companies won't pay if you come to them after the fact.
3. Save your important papers and emails.
Keeping copies of important papers and emails seems pretty simple, right? If you were told to go get your bank statement and emails to your banker from April 2004 right now, how long would it take you? Could you even get them? I'll save you the requisite lecture on backing up, but I will tell you that when you burn a DVD with old emails on it, burn two of everything. Keep one set off site in a safe place. If you're limited on space, scan important files (things like bank statements, contracts, letters, etc.) and put them onto DVDs too. You never know when you'll need something specific that will make or break the case, and you don't want to lose just because you can't find it.
4. Start saving now for that rainy day.
Lawsuits are expensive for everyone, so get ready to pay what you will think is too much money in order to resolve it. And knowing that they are going to happen to every business every once in a while, I think you should set up a reserve account where you pool profits to be used when you have excessively high legal costs. It will help make a bad situation a bit easier.
5. Know when to say when.
As for when to fight and when to settle, that's an intensely personal choice. I used to think that it was a mere financial choice -- do what costs you less. However, now that we've been through this a few times, I think principal plays a big part. While you don't want to be stupid about it and spend thousands and thousands of dollars to prove a point, most times I think it makes sense to stand up for what is right, even if it seems more costly than settling. In most cases, justice is served and the party in the right wins the case. You can also make a name for yourself in your industry/community as someone who fights BS claims rather than one who settles out just to avoid court. In the long run, settling will cost you more if everyone thinks they can sue you and get a specific amount in settlement every time.
6. Learn your lessons.
When you're done with the suit, you need to look objectively at what happened and see if you can do something next time to avoid the situation all together. It might mean changing policies, amending your system or revamping your contract. If you learn a good lesson from it, the cost and time wasted will have at least given you some tangible benefits.
Lawsuits are like food poisoning. You never know when you'll get one, it can come through no fault of your own, and during it you think you'd rather be dead than to feel that way. But know that you won't die from food poisoning, and the lawsuit won't kill you either. The name of the game is to press on through it -- you'll make it and be better for it in the end. Once you've done it a few times, if you find yourself in an awkward situation where someone threatens a lawsuit, you'll actually be able to brush the threat off since you know you'll get through it. Until then, fake it and don't let people push you around!