What happens if I get sued?

The Accident - Making a Claim

When an incident occurs, first call your Insurance Broker or Adviser, or direct to the insurer if preferred to report the event. Never delay reporting. You will either be provided claims forms or you with some insurer you can report the claim verbally. Again if followed up a third party claimant or their solicitor, do not respond. Do not admit liability. There is often pressure to do so, but leave it to the experts.

If it was one of your employees involved, you will want to speak with them as soon as possible. You will want them to write down everything about the incident they can remember. You want to find out if there was any contributing factors. Find out all of the facts: good and bad.

With Liability claims, your insurer is likely to appoint a solicitor. They have two roles, to protect your position but also to investigate the incident and to report to insurers that it is covered by the policy taken.

The appointed solicitor will want to talk to you as soon as possible. Please cooperate as much as possible and get them all relevant information relating to the matter.

You also need to be aware of any additional reporting requirements you may have with your state or federal department. These could be environmental, department of health or Workplace Health and safety. The solicitor should be able to advise on this.

Liability claims are what we call “long tail” claims because they can take months or even years to settle. The delays are usually caused by disagreement over the version of events and who should be liable and to what degree. However, it is in the interests of all parties to seek to settle these matters as soon as possible just to minimise the cost of such claims which continue to rise over time.

Negotiating with the Injured Party

Your insurer or their Solicitor will make contact with the injured party. Your employees should not speak with the injured party, relatives or representatives. At this time refer any calls or letters regarding the accident to your insurer or the solicitor assigned.

Liability claims can involve a claim of negligence on the part of your employee and your company can therefore be held “vicariously” liable. Common law claims of Negligence will likely have a time limit in which they can be filed as lawsuits called a statute of limitations. Your insurer will request as much information as possible from the injured party such as medical bills, lost wages, and other information relating to their claim.

They will then attempt to negotiate a settlement before a lawsuit is filed. In most instances, the insurance company can settle the claim without your permission if it will eliminate a lawsuit and further expenses. Policy holders are quite often very surprised to find that they have very little input at this stage. Your Insurance Broker or advisor will keep you up to date and seek to explain their reasons. We can discuss with insurers any concerns with their approach, which is usually based on economic cost rather than principle.

It does take time for a full evaluation of a claim to be made. Under the law, damages in a negligence case include medical damages, pain and suffering, lost time at work, allowance for permanent injuries, property damage and even the claims of spouses. The insurer has a number of options at its disposal to evaluate damages and to negotiate the claim.

Lawsuit

If the claim cannot be settled, the injured party may file a lawsuit against your business. The injured party will be known as the plaintiff and will file a complaint with the appropriate court claiming negligence and damages. The complaint will name your company and the person involved, such as a Director or employee. Your business and the employee will be defendants and your assigned insurance counsel will defend the business and employee.

All states have different procedures and laws, but a lawsuit generally follows the same form in every state:

1.    Pleadings. A complaint is filed and your Solicitor will file a defence to the complaint.

2.    Scheduling and Discovery. The court will hold an initial conference and set a schedule for the rest of the case. Both sides will also engage in discovery. This is asking written questions, requesting documents and medical bills and appearing to give testimony at depositions. It is your obligation under the policy to cooperate fully with your Insurer’s Solicitor and the insurer during all phases of the lawsuit and this part will be the most time consuming.

3.    Motions. Each side may file motions to prove or dismiss certain aspects of the case.

4.    Final Conference and Attempt to Settle. Prior to trial, the court will hold a final conference and see if the matter can be settled.

5.    Trial. A trial will be held and a company representative will need to attend.

6.    Verdict and Judgment. The court or jury will decide liability and award damages and the court will convert that verdict into a judgment - the amount your company is liable for.

 

Judgment

After the trial, the verdict becomes a judgment. A judgment is a legal document giving the plaintiff the right to recover a specific sum of money from your company. If you do not have any insurance, the plaintiff is entitled to seize and sell equipment including vehicles, buildings and to levy accounts receivable even to the extent of applying to place you in administration to satisfy the judgment.

Your insurer is expected to pay the judgment if it is covered under the policy up to the policy limits. By doing so, the insurer will satisfy the judgment and the judgment will be marked as satisfied. If the judgment exceeds policy limits, the business will still have a judgment against it for the remainder after the insurer tenders limits.

Aftermath

Your business insurance premiums are based on industry history and your company's own claims history. Large claims in your loss history can have a significant effect on your future premiums. Premiums will increase. In some cases, the insurer may even choose not to renew your business insurance. In this case, we as your Insurance Broker advise implementing improvements to systems and procedures to demonstrate much less probability this will occur again for us to sell your risk to alternate markets who will factor in everything that has occurred before considering the risk further.

In conclusion

We all recognise that accidents can happen but there are many ways a business can prevent these claims. Good preparation, a constant review of loss management procedures for the business, and a plan on how to deal with any issue that arises, will minimise the risk and the impacts on your business.

To discuss any of these matters, call your Insurance Broker. Call a good one, such as CPR Insurance services, experts who will save you!

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