After an Accident: Protect Yourself Against a Lawsuit
Accidents happen. People get hurt. Property is damaged. Lawsuits are filed. That is a reality of our society. Accidents and lawsuits may be separated by many months or even years. Waiting until a lawsuit is filed against you is too late to start the process of defending yourself. Experienced claims managers and defense attorneys know that the information needed to defend a claim must be gathered and preserved in the minutes, hours, and days after the accident. That is the most critical phase of any liability claim. Attorneys who defend such claims need evidence to support a client’s rightful position when they go into battle for that client.
Accident Response: Even if you were not at fault and even if the incident was not severe enough to cause any injury, you will need evidence to defend a claim that you were and it was. As soon as an accident is reported, create an accident folder and fill it with copies of everything that might come in handy to defend that claim. If no claim is made and the statute of limitations passes, the folder’s contents can be deleted (if electronic) or recycled (if on paper). If a lawsuit is filed, that folder will save your organization untold amounts of money and, along the way, provide your attorney with a sword and shield. If the circumstances indicate a claim is likely to be brought against you, do the groundwork and get the expertize needed to preserve the evidence. A thorough investigation (tailored, of course, to the likely level of exposure) turns “he said – she said” into hard evidence and uncertainty into knowledge. Accurate and provable information enables an effective defense to be mounted when the time comes to negotiate or litigate the claim. If the exposure warrants the expense, retain a defense attorney at the outset to oversee the investigation and infuse it with legal confidentiality to protect adverse information from later being used against you.
Litigation Hold: An effective “litigation hold,” or “focused records retention” policy, can help mitigate the impact of liability claims. Nearly every business has a record retention policy, but the prospect of future litigation requires exceptions to the routine. By the time a lawsuit is filed, some document retention periods may have expired and the records needed to defend the suit are no longer available. The consequences of not having those records available for litigation can be devastating to an otherwise defensible liability claim. The lack of documentation can make a safety-conscious company seem careless, trigger unnecessary factual disputes, and greatly increase the expense and risk of defending a claim. In many jurisdictions, an “evidence spoliation” claim can result in increased damage awards, monetary or evidentiary sanctions, or even punitive damages. If an organization has implemented a reasonable litigation hold policy before a loss occurs, the evidence needed to defend a lawsuit will be available and a court is far less likely to punish it for lost or missing evidence. To be effective, a litigation hold must be activated immediately after a loss – long before any litigation is commenced. In fact, it may be more accurate and useful to call the process a “claim hold” or an “accident hold.” Whatever you call it, keep the policy realistic and practical. Don’t set it up for failure by making it too difficult to properly manage. Keep in mind that the policy itself may be discoverable in a lawsuit. Imagine a plaintiff’s lawyer comparing your litigation hold policy to the records that you actually preserved, and you will have a good idea of what not to include in the policy. Insurers and TPAs should not only develop and carry out their own litigation hold policy, they should encourage and assist their commercial insureds to adopt a similar policy.
What to Keep: Of course, you can’t keep everything after every accident. The development and execution of a “litigation hold” policy requires advance planning and coordination between people and departments who may not interact much otherwise. Ironically, a “litigation hold” or is probably easier to accomplish in a large company than in a small one. The following suggestions for a litigation hold policy are just that – suggestions. Use any of them, or not, as you see fit, to develop a policy that fits your organization:
1. Develop criteria for triggering a litigation hold. Whether to institute a litigation hold is generally determined by the severity or exposure level of the loss. A multiple fatality will, of course, justify a hold while a minor property damage incident will not. Lots of gray area lies between those two extremes. Some large companies have more than one level of hold, with the number and depth of the records to be preserved determined by the severity or exposure level of the claim. Depending upon the existing structure of the company, a person or team can be designated to determine whether and to what extent a particular loss triggers a litigation hold. The decision should be made as soon as possible after the loss occurs.
2. Create a list of claim-sensitive records. From an adjuster’s and defense lawyer’s point of view, every business record should be put in a vault and every vehicle involved in an accident should be hermetically sealed and stored in a temperature-controlled environment for several years until any possibility of a lawsuit has passed. However, when you have a business to run, reasonable compromises must be made. Each company should carefully consider what is available and decide which records to include in its litigation hold. If a record could conceivably be relevant to liability for an accident, it should be on the list. A company-specific checklist should be created and utilized for each serious loss occurrence.
3. Assign a responsible person to oversee the hold. In larger companies, the claims manager or a designated assistant will be responsible for ensuring that the litigation hold policy is implemented and carried out properly after a loss. In smaller companies, supervision of litigation holds could be added to someone’s job description. Whoever is assigned will be responsible for requesting the records, maintaining the checklist, following up over time and ensuring the letter and spirit of the litigation hold policy are carried out.
4. Communicate the litigation hold to all relevant record keepers. It does no good to implement a litigation hold and create a list of records unless the custodians of those records know about it and carry out their responsibilities. Develop a system to ensure prompt and effective communication with the appropriate record keepers each time a litigation hold is triggered. Without immediate and effective communication, data may be lost within hours of a loss.
5. Designate a repository. Everyone who handles claim-sensitive records should be aware of where to send the records when a litigation hold is implemented. It can be a single, central location or a designated area within the control of the responsible person. It can be a file in the cloud, on a server, a CD storage box, a desk drawer, a file cabinet, or even a cardboard box on a shelf in a storeroom. The goal is to ensure that the records are still there and can be readily located if necessary two, three, or four years later.
6. Schedule periodic reviews. Statutes of limitation vary widely from state to state, so it is seldom safe to set an arbitrary time limit applicable to all litigation holds. After the responsible records custodian is satisfied that all statutes of limitation have expired, the materials can be purged. The general rule is that it would be better to wait too long than not long enough. When in doubt, call a trusted defense lawyer in the applicable jurisdiction and ask.
Time is of the Essence: Your organization can be sued. It should have a specific policy in place to ensure that the items necessary to defend claims will be available when they are needed. If you wait until the next accident occurs before formulating an accident response procedure and litigation hold policy, it may be too late.