By Scott Zucker
Getting sued is somewhat analogous to having a car accident. Sometimes, no matter how hard you try to drive safely, there's always a chance you'll get rear-ended by the other guy. Under today's legal system, even if a business does everything right, it can still be sued. The self-storage business is no exception. Like all other businesses, storage owners face potential disputes with their employees and vendors. As property owners, storage operators additionally risk premises liability claims such as personal injuries. But most commonly, they face claims from their tenants alleging wrongful sales, damage or loss to their stored property.
Unfortunately, having a good lease and following the proper procedures for foreclosure and sale will not prevent you from being sued. Litigation has exploded in this country and self-storage facilities, based upon their public operations, steady flow of cash and large insurance protection, are big targets. It's likely that in the course of operating your facility, you will eventually be sued.
The following is a crash course on what happens in a lawsuit and some things to think about as you travel down the road of litigation. (Watch out, it's a bumpy road.)
1. Notify Your Insurance Company
Upon service of the lawsuit, one of the first things a storage owner should do is notify the facility's insurance company. The insurance company, if it has any questions whether the claim is covered under its policy, will likely issue what is known as a "reservation of rights." This means that it will assume the obligation of defending you in the lawsuit, but reserves its right to later determine whether the claim is actually covered.
The insurance company will then assign the lawsuit to a lawyer who represents the insurance company in your area. The facility may also request that their own lawyer (if they have one) represent the facility in defending the lawsuit on behalf on the insurance company. If you have insurance, but fail to notify your insurance company, the company may be able to refuse coverage based on lack of notice. It is a prudent policy to always notify your insurer in response to a lawsuit.
2. Gather the File
It is your obligation as the facility owner to maintain all of your records concerning the operation of your business. If the lawsuit relates to a tenant loss or damage claim, you will need to pull together the tenant's file and all the pertinent documents relating to the claim. If the lawsuit involves a personal injury, you should obtain a copy of the incident report, photographs taken (if any), police reports or any other documents relating to the incident. All of this information, as well as names and addresses of individuals who have knowledge of the matter, should be provided to the lawyer handling your case. Remember, your lawyer can only defend you to the extent that he or she is given complete information about the claim.
3. File an Answer
Once the case has been assigned to a lawyer, it is the lawyer's obligation to file an answer to the complaint. If you are not insured and do not submit the claim to an insurance company, then you are obligated to file it. If you or your lawyer do not file an answer to the complaint, you will be in default. In other words, if you fail to answer the complaint, the court will presume you are admitting the allegations of the complaint, and a judgment against you will be entered. It is imperative that a timely answer is filed in response to a complaint. If it is appropriate, your lawyer will seek to dismiss the complaint at the time the answer is filed based upon specific legal defenses.
Unfortunately, many of these defenses can be cured by the plaintiff, and even if the case is originally dismissed based upon such defenses, the case can later be refiled.
4. Discovery
After the answer is filed, and before a trial occurs, there is a phase of the proceedings called discovery. During discovery, each party is entitled to ask questions of the other party to learn all about their position in the case. Discovery can take the form of interrogatories (written questions to the other side), requests for documents or depositions. In depositions, the parties meet face to face and lawyers ask questions in the presence of a stenographer who keeps a written record of the testimony. Depositions are used both for discovery and for later use at trial to impeach witnesses who may later change their testimony. Discovery can be a long, arduous process that is very costly to both sides. However, discovery is necessary in order to build a case for the plaintiff and to defend a case for the defendant.
5. Negotiation/Settlement
Through the course of discovery, and up until trial, it is important that both sides always keep in mind the practicalities of settling the lawsuit. If the plaintiff has brought a lawsuit that has merit and there is some risk that the defendant facility may ultimately be found liable, there may be some benefit in negotiating a settlement of the tenant's claim. Settlements are oftentimes the best resolution of a bad situation. Negotiations for resolution and settlement commonly occur from the beginning of the case to the end. However, most settlements are best reached early on in the case. Settlements are often harder to conclude closer to trial due to the time and expense already incurred by the parties. Settlements should not be reached lightly. However, they are an economic reality of litigation due to trial costs and the physical and mental wear and tear on facility owners involved in the litigation. Furthermore, where there is a risk of high damages, settlement reduces those damages to a lower number.
6. Trial
Certainly, not all cases can be settled, and ultimately many cases are brought to trial. Just like on TV, the parties are able to present their cases before a judge or jury (the trier of fact) and have their day in court. The parties are able to tell their sides of the story and allow the trier of fact to then decide on two issues: 1) whether the facility is liable for the loss or damage, and 2) the amount of damage suffered by the plaintiff. It is possible that a judge or jury may find a facility liable for the loss or damage to tenant's goods, or to have been responsible for a party's injury, but at the same time find low damages. Unfortunately, the most common scenario is one in which liability is found, as well as significant damages.
Trial is generally broken down into six parts. First there is jury selection and a process of voire dire. This is the phase in which both the plaintiff's and the defendant's lawyers interview the potential jurors to select appropriate jurors for the trial. Once the jurors are selected, each party gives its opening statements presenting its side of the case. After the opening has been concluded, the plaintiff then presents its case to the court. At the conclusion of the plaintiff's case, the defendant is then entitled to present its case to challenge the case of the plaintiff. At the conclusion of the defendant's case, each side presents its closing arguments. Last, there is the jury deliberation and verdict.
Lawsuits are not fun experiences for the parties involved. Unfortunately, lawsuits cannot be stopped. Hopefully, however, frivolous lawsuits will be dismissed, valid lawsuits will be settled, and defensible lawsuits will be tried and won.
This article is reprinted from the Mini-Storage Law Commentary, a newsletter for owners and managers, written by Scott Zucker and published by the law firm of Shapiro, Fussell, Wedge, Smotherman & Martin. The information included is generalized for the purpose of illustrating principles and laws, but legal counsel is always recommended. For more information regarding the article or to obtain a copy of the newsletter, contact Mr. Zucker at One Midtown Plaza, 1360 Peachtree St., Suite 1200, Atlanta, GA 30309; (404) 870-2232.
