What to Do When You Get Sued
November 1, 1997
What to Do When You Get Sued
By Scott Zucker
Getting sued is somewhat analogous to having a car accident.Sometimes, no matter how hard you try to drive safely, there'salways a chance you'll get rear-ended by the other guy. Undertoday's legal system, even if a business does everything right,it can still be sued. The self-storage business is no exception.Like all other businesses, storage owners face potential disputeswith their employees and vendors. As property owners, storageoperators additionally risk premises liability claims such aspersonal injuries. But most commonly, they face claims from theirtenants alleging wrongful sales, damage or loss to their storedproperty.
Unfortunately, having a good lease and following the properprocedures for foreclosure and sale will not prevent you frombeing sued. Litigation has exploded in this country andself-storage facilities, based upon their public operations,steady flow of cash and large insurance protection, are bigtargets. It's likely that in the course of operating yourfacility, you will eventually be sued.
The following is a crash course on what happens in a lawsuitand some things to think about as you travel down the road oflitigation. (Watch out, it's a bumpy road.)
1. Notify Your Insurance Company
Upon service of the lawsuit, one of the first things a storageowner should do is notify the facility's insurance company. Theinsurance company, if it has any questions whether the claim iscovered under its policy, will likely issue what is known as a"reservation of rights." This means that it will assumethe obligation of defending you in the lawsuit, but reserves itsright to later determine whether the claim is actually covered.
The insurance company will then assign the lawsuit to a lawyerwho represents the insurance company in your area. The facilitymay also request that their own lawyer (if they have one)represent the facility in defending the lawsuit on behalf on theinsurance company. If you have insurance, but fail to notify yourinsurance company, the company may be able to refuse coveragebased on lack of notice. It is a prudent policy to always notifyyour insurer in response to a lawsuit.
2. Gather the File
It is your obligation as the facility owner to maintain all ofyour records concerning the operation of your business. If thelawsuit relates to a tenant loss or damage claim, you will needto pull together the tenant's file and all the pertinentdocuments relating to the claim. If the lawsuit involves apersonal injury, you should obtain a copy of the incident report,photographs taken (if any), police reports or any other documentsrelating to the incident. All of this information, as well asnames and addresses of individuals who have knowledge of thematter, should be provided to the lawyer handling your case.Remember, your lawyer can only defend you to the extent that heor she is given complete information about the claim.
3. File an Answer
Once the case has been assigned to a lawyer, it is thelawyer's obligation to file an answer to the complaint. If youare not insured and do not submit the claim to an insurancecompany, then you are obligated to file it. If you or yourlawyer do not file an answer to the complaint, you will be indefault. In other words, if you fail to answer the complaint,the court will presume you are admitting the allegations of thecomplaint, and a judgment against you will be entered. It isimperative that a timely answer is filed in response to acomplaint. If it is appropriate, your lawyer will seek to dismissthe complaint at the time the answer is filed based upon specificlegal defenses.
Unfortunately, many of these defenses can be cured by theplaintiff, and even if the case is originally dismissed basedupon such defenses, the case can later be refiled.
4. Discovery
After the answer is filed, and before a trial occurs, there isa phase of the proceedings called discovery. During discovery,each party is entitled to ask questions of the other party tolearn all about their position in the case. Discovery can takethe form of interrogatories (written questions to the otherside), requests for documents or depositions. In depositions, theparties meet face to face and lawyers ask questions in thepresence of a stenographer who keeps a written record of thetestimony. Depositions are used both for discovery and for lateruse at trial to impeach witnesses who may later change theirtestimony. Discovery can be a long, arduous process that is verycostly to both sides. However, discovery is necessary in order tobuild a case for the plaintiff and to defend a case for thedefendant.
5. Negotiation/Settlement
Through the course of discovery, and up until trial, it isimportant that both sides always keep in mind the practicalitiesof settling the lawsuit. If the plaintiff has brought a lawsuitthat has merit and there is some risk that the defendant facilitymay ultimately be found liable, there may be some benefit innegotiating a settlement of the tenant's claim. Settlements areoftentimes the best resolution of a bad situation. Negotiationsfor resolution and settlement commonly occur from the beginningof the case to the end. However, most settlements are bestreached early on in the case. Settlements are often harder toconclude closer to trial due to the time and expense alreadyincurred by the parties. Settlements should not be reachedlightly. However, they are an economic reality of litigation dueto trial costs and the physical and mental wear and tear onfacility owners involved in the litigation. Furthermore, wherethere is a risk of high damages, settlement reduces those damagesto a lower number.
6. Trial
Certainly, not all cases can be settled, and ultimately manycases are brought to trial. Just like on TV, the parties are ableto present their cases before a judge or jury (the trier of fact)and have their day in court. The parties are able to tell theirsides of the story and allow the trier of fact to then decide ontwo issues: 1) whether the facility is liable for the loss ordamage, and 2) the amount of damage suffered by the plaintiff. Itis possible that a judge or jury may find a facility liable forthe loss or damage to tenant's goods, or to have been responsiblefor a party's injury, but at the same time find low damages.Unfortunately, the most common scenario is one in which liabilityis found, as well as significant damages.
Trial is generally broken down into six parts. First there isjury selection and a process of voire dire. This is the phase inwhich both the plaintiff's and the defendant's lawyers interviewthe potential jurors to select appropriate jurors for the trial.Once the jurors are selected, each party gives its openingstatements presenting its side of the case. After the opening hasbeen concluded, the plaintiff then presents its case to thecourt. At the conclusion of the plaintiff's case, the defendantis then entitled to present its case to challenge the case of theplaintiff. At the conclusion of the defendant's case, each sidepresents its closing arguments. Last, there is the jurydeliberation and verdict.
Lawsuits are not fun experiences for the parties involved.Unfortunately, lawsuits cannot be stopped. Hopefully, however,frivolous lawsuits will be dismissed, valid lawsuits will besettled, and defensible lawsuits will be tried and won.
This article is reprinted from the Mini-Storage LawCommentary, a newsletter for owners and managers, written byScott Zucker and published by the law firm of Shapiro, Fussell,Wedge, Smotherman & Martin. The information included isgeneralized for the purpose of illustrating principles and laws,but legal counsel is always recommended. For more informationregarding the article or to obtain a copy of the newsletter,contact Mr. Zucker at One Midtown Plaza, 1360 Peachtree St.,Suite 1200, Atlanta, GA 30309; (404) 870-2232.
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