How Not to Get Sued

Posted by Jennifer L. Gregg on Mar 18, 2015

Without a doubt, one of the most common questions I get from folks in the construction industry is “how do I avoid getting sued?” Unfortunately the answer is “you can’t.” There’s no magic shield to prevent lawsuits. The United States is a highly litigious country where we can sue anyone for just about anything, and everyone is entitled to their day in court. Anyone who owns a business realizes that whenever you do business with another person or entity or any time your employees drive their company vehicles to work or you gain success as a company, you are vulnerable to a lawsuit. 

We can’t stop running our businesses out of fear of being sued, but there are best practices to avoid the risk of a lawsuit:

Be Selective in Your Relationships. There is no law that says you have to do business with anyone and everyone (as long as you aren’t discriminating on prohibited grounds). Be selective in your business relationships, research the suit history of the company and find out about its reputation.

Be Aware of High Risk Jobs. The level of risk will depend on your business type.  For construction projects, watch out for jobs that start before funds are available, a contract is in place, or before plans are completed.

Follow the Laws. Follow all laws and regulations, including the labor laws and Contractors’ State License Board laws. Make sure you and your subcontractors have the right licenses and permits in place.

Have a Good Contract. A good contract is a clear contract. It clearly defines scope of work, payment terms, work schedule and allocates risk. A contract should be negotiated and executed before any work starts.  There are also various provisions you can include in your contract which may reduce the risk of being sued (i.e., prevailing party attorney’s fees clause, indemnification and the right to suspend performance for non-payment).

Be Honest And Maintain Credibility. Understand that taking advantage of a deal may feel like a good move at the time, but it can create an atmosphere that calls for payback. Building a relationship of shared mutual success and teamwork can maintain your credibility and smooth over differences of viewpoint down the road.

Communicate. Good communication is critical as poor communication is the No. 1 cause of lawsuits. Set expectations, keep each other informed (whether the news is good or bad), be a good listener and make sure important communications are in writing. 

Deal With Disputes as They Arise. It won’t do you any good to procrastinate or put off disputes. When you do deal with them, approach each dispute effectively. This means standing on your principles, but also being willing to compromise when necessary.  Keep the “big picture” in mind (don’t win the battle and lose the war), and make sure you deal with the right people.

Use Alternative Dispute Resolution When Possible. Consider mediation, arbitration or informal settlement discussions before filing a suit. These options are less costly, less time consuming and often less adversarial than litigation.

Prepare and Maintain Excellent Business Records. Be organized and thorough in documenting your projects with job logs, change orders, written correspondence, photographs and videos, inspection reports, material tags and as-built documents. 

Think Twice Before You Sue. Remember, there are always two sides to a story. If you file suit on a claim, there is always a chance the opposing party will file a counter suit.

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