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What can I do to reduce my risk of business litigation?

Be proactive and anticipate that problems may arise. Retain a transactional attorney to assist you in drafting or reviewing contracts. Discuss your business with a qualified business insurance broker and ensure that you have the appropriate type and amount of insurance.

Read all contracts carefully. If you have any contractual relationship with another party, read the contract carefully and understand your rights and obligations under the contract. Sometimes, a third party may be liable under your contract and be required to defend and indemnify you from a claim, lawsuit or damages. If this is the case, be sure to fully understand the third party’s rights and obligations under the contract, as well.

If litigation is eminent, see if you can work it out. You may wish to try to work it out with your adversary prior to hiring counsel. Meeting your adversary half way may save you money and avert all out legal warfare. But remember, “Anything you say can and will be used against you in a court of law.” In the event you can’t work out your problem, assume that anything you say or any letter you write will later be presented to a court by your adversary. If you were able to work it out, it would probably be in your best interest to hire an attorney to draft a settlement agreement to ensure that the matter is properly resolved. Finally, remember that if you are the plaintiff, your chance of recovering monetary damages is only as good as your adversary’s assets. Many judgment debtors don’t voluntarily pay the judgment … you may have to find and forcibly take their assets (through the use of a marshal or sheriff) after the litigation has concluded, which may be more hassle than it’s worth especially if your adversary doesn’t have many assets.

Check out your insurance policy and contact your broker. Litigation regarding the matter at hand may be covered under your policy or under insurance that a third party was required to obtain on your behalf. Many contracts require one of the contracting parties to either provide insurance or list the other party as an additional insured. In the event you are covered, promptly notify the insurer in the manner required under the provisions of your policy. Many times the insurance company will hire an attorney to defend you.

Consult with an attorney. Most attorneys offer free initial consultations. Don’t be afraid to ask the attorney questions and get a cost estimate. Just remember that litigation costs fluctuate and are very difficult to estimate. Keep the following questions in mind when selecting an attorney:

  • Is the attorney qualified in the field of law you will be litigating?
  • Are you comfortable with the attorney’s approach?
  • Does he or she consider solutions without resorting to litigation such as mediation or arbitration?
  • How is the attorney’s fee structured?