Often, our international clients find themselves in a United States litigation conundrum:
My company has never been sued before, why now? and
How can I better prepare to prevent a lawsuit or mitigate risk for the future?
The United States has a reputation of being litigious. Throughout the world, people have been warned of the infamous McDonalds Hot Coffee case where high damages were awarded to a woman who claimed to not know her “hot” coffee was hot. And while it is impossible to prevent liability entirely, there are things you can do to limit exposure.
Written Agreements with Clear Contractual Terms:
First, companies should always enter signed, written contracts to protect their interest. While the concept of trust in a business relationship is important, unfortunately, trust between parties cannot be relied on during the course of a lawsuit. As such, it is generally recommended that commercial parties enter into written agreements.
Each written agreement should contain clear contractual terms. While terms vary from contract to contract, common terms that are used to protect a companies’ interests include: limitation of liability clauses; disclaimer of implied warranties clauses; choice of law and choice of venue clauses; attorney’s fees provisions; and arbitration clauses.
Be aware of your local laws and how they may differ from those in the United States. In Italy, for example, a prevailing party in a lawsuit is automatically awarded attorney’s fees. However, this is not the case in the United States where the parties must specifically contract for attorney’s fees, unless provided for by statute. As such, if you fail to contract for attorney’s fees in favor of the prevailing party, your company may find itself as the prevailing party in a lawsuit, but responsible for over quarter million dollars in its own attorney’s fees. Therefore, it is important that companies doing business in the United States clearly contract in favor of attorney’s fees.
Adequate Insurance Coverage:
Finally, companies should have adequate insurance coverage. As a general rule, commercial liability coverage should equal at least half or more of the company’s annual revenue. This can be done through standalone policies or effectively through various umbrella policies. While coverage is often a significant expense, it may be your company’s saving grace in a products liability or personal injury lawsuit, where damages can be significant, just as they were in the McDonalds Hot Coffee case.
If you are unexpectedly hit with a lawsuit, first contact an attorney. Refrain from internal written communications about the claim, as those may be discoverable by a party to the lawsuit and may ultimately hurt your case.
The above is intended to be a summary of options to mitigate risk and is not intended to be legal advice or an exhaustive list of recommendations. If you have a legal issue or a specific question, please contact Valla & Associates directly.
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Requests for information or insights on the issue discussed in this article may be addressed to lisa.schachne@vallalaw.com. This article is for information purposes only and does not constitute legal advice. The information contained herein may be outdated or incomplete, and shall in no way be taken as an indication of future results. The transmission of this article is not intended to create, nor does its receipt constitute, an attorney-client relationship between preparer and reader. You should not act on the information contained in this article without first seeking the advice of an attorney.