A former client decides they’re not happy with the service you gave them in previous years. They sue you for fraud, breach of contract, and a few other various claims. They also want 3x the project’s value to settle. Now you’ve got to respond to these allegations with a lawyer. What do you do? Taking a suit to trial can cost upwards of $20,000, and the chances of a counter-suit to reimburse your legal expenses back is difficult to win. Wait, you do have a lawyer, right?
“This situation happened to us. We were sued for tens of thousands of dollars by a client who decided they weren’t happy with the site we gave them, even though the site was used by them and was profitable for years. We were paid for the project back when it launched, and we even played a round of golf together to celebrate.”
The former client served LessEverything with the suit, and Allan and Steve had 30 days to respond. They called a lawyer they knew personally from a huge law firm. He looked over the suit, found a legal loophole and answered back with the findings. At that point, Allan and Steve had the option to proceed into “discovery,” in which case there was a very good chance the judge would throw the suit out--only costing them $3,500; however, there was still a small chance the judge wouldn’t be aware of the loophole, or per- haps just be in a bad mood on that particular day. In light of all that, they decided to offer the former client $3,500 (a very small percentage of the suit’s original price). The former clients accepted. Allan and Steve were able to settle and move on. The total amount paid with legal fees was $8,000. Yes, $8,000 and many nights of missed sleep.
“The loophole was some obscure and long-forgotten Alabama state law that says a suit brought in Alabama can not cross state lines (or something like that). When Allan did the work for this client, he was located in Alabama, but when the suit was filed, LessEverything was located in Florida, so none of the defendants resided in Alabama.”
The legal system in the United States is screwed. You have to pay money to defend yourself even when the allegations are total bullshit. You can be sued no matter how good your work is or how honest you are. Regardless of how great your contract is, you can, and most likely will, be sued, and it will suck hard. Yes, no matter how air-tight your contract is, you can be sued, and you’ll pay to defend your contract. Stop stop stop. Think about this... YOU can be sued at any moment about anything, and YOU will pay to defend yourself. AND it’s rare that anyone gets the other party to pay for their legal fees in this battle.
Bite the bullet. Buy errors and omissions insurance. It should only cost you a couple hundred dollars a year. You’re buying peace of mind. If you do business long enough, you will be sued.
“We got lucky. If our attorney wouldn’t have found a legal loophole, we would have tried to settle (for tens of thousands of dollars) or gone into discovery and legal depositions. The cost for either of these processes would have been between $10K - $100K.”
Errors and omissions and general liability insurance helps in the situation of being sued based on work you’ve done. Here’s how a lawsuit goes, if you have insurance: you get served papers, you call your insurance company, you send the files to the insurance agency, they handle the bills and filings, and will periodically ask you for answers. Financially, you’re covered.
Even if you have insurance, you should consult with an attorney immedi- ately if you are sued or are threatened with being sued--whether or not you have errors and omissions insurance.
Contracts are needed. They’ll ward off most dummies who think about suing you. They cannot, however, stop a lawsuit. Anyone can sue anyone for anything.
“Litigation costs big bucks, and it’s not a good feeling being in a situation that you can’t control. The loss of sleep and the feeling of uncertainty is terrible. The chances of you recovering any of your legal fees are very, very small and will require a secondary lawsuit, which will cost more money.”
No matter how honorable, loving or kind you think you are, someone will eventually be upset with you. Are you prepared?
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