You’ve been sued. Now what?

Litigation can seem scary, especially if it is your first time being sued. Remain calm and try not to imagine the worst. You can continue to help clients buy, sell, and lease real estate.

If you are an agent, tell your broker immediately. In most instances, your broker will contact your errors & omissions insurance provider on your behalf. However, if your broker is unable to do so right away, you should report the claim directly to the insurance company. If you are the broker, contact your E&O provider as soon as possible. Most insurance policies require that a claim be reported within a certain time period, and failure to do so could result in your claim being denied. Your insurance provider will need a copy of the lawsuit to determine coverage and next steps. If you or your broker does not have insurance coverage, it is advisable to promptly contact an attorney for help.

Once a lawsuit is filed against you, you must respond to that lawsuit within a short period of time. If the lawsuit was filed in a Texas county or district court, your answer to the lawsuit is typically due on or before 10 a.m. on the next Monday following the expiration of 20 days after the date you were served with the lawsuit. Failure to respond timely to the lawsuit can result in a default judgment against you. Do not delay!

Here are some recommendations from Lee Santos, AXA XL TX Claim Manager.

DO share your files with insurer

If you are an agent, your broker and your insurance provider will need all of your documentation related to the transaction in question. If you are a broker, carefully review and promptly submit all relevant documentation related to the suit.

Santos says that documentation is key to defending yourself against a lawsuit. This is an excellent reminder that you should have a strong record and data retention policy in place to ensure that all pertinent information related to a transaction is retained, such as:

• A system for saving text messages and voicemails
• Following up all in-person and phone conversations with an email summarizing what was discussed
• Do not delete or destroy information, including emails, even if you do not think it is relevant.

Sharing all relevant documentation early on will help your insurer and legal counsel investigate the matter efficiently and prepare an appropriate and timely response.

DON’T talk about the lawsuit

Your E&O provider will likely hire legal counsel to represent you. Santos recommends that you not discuss the lawsuit with anyone except your broker (if you are an agent), your insurer, and your legal counsel. Refrain from posting anything online. If anyone calls asking for information, say that you will not discuss the matter and, if you are represented by an attorney, refer them to your attorney.

DO trust the process

Litigation is a collaboration between the insurer, the insured (you and/or your broker), and your legal counsel. The insurer will review the case to determine any potential liability that you and/or your broker may have and whether the situation is covered under your policy. The insurer will also develop cost estimates for settling the case versus bringing it to trial.

In some instances, the insurer may recommend a settlement, irrespective of guilt. This path can minimize costs and limit the uncertainty of trial. If a full and final settlement is agreed upon by all parties, the case is resolved. Most E&O policies require the insured (the brokerage) to pay a deductible, and the insurer will pay any amount above and beyond the deductible for covered claims, up to the limits of the policy. Your brokerage’s insurance policy will state the amount of the deductible and policy limits on the declarations page of the policy.

DON’T reach out to the other side

If you have legal counsel, you should not communicate with the opposing party or their counsel unless you have been advised to do so by your attorney. If the opposing party or their attorney contacts you, you should notify them that you have an attorney representing you and that they must contact your attorney instead.

DO be patient

According to Santos, it commonly takes a year or longer to resolve a legal dispute when litigation has been filed. Every case is different, and what may appear to be a straightforward matter could actually involve complex legal issues. Even in the best-case scenario, resolution could take several months.

The majority of lawsuits settle without going to trial. Many times, a settlement can be reached without an admission of fault. Settlement agreements are also usually confidential and not included in the public record. Settling your case, if appropriate, could save your brokerage tens—or even hundreds—of thousands of dollars and years of effort spent fighting the case in court.