What to expect when you’re accused of defamation
Most of us have spouted off in anger. Maybe you left a one-star review on Yelp or wrote a nasty email after a bad experience with a business partner.
But the New Hampshire Union Leader reports on one business owner who took his dissatisfaction to a whole new level. The report states mortgage broker Michael Gills used his business’s electronic billboard to accuse prominent lawyers and business people of being drug dealers and extortionists.
Unsurprisingly, Gills became embroiled in a defamation lawsuit.
You don’t have to put your derogatory comment up in lights to get slammed with a defamation claim. According to attorney Lee E. Berlik, founder and managing member of the law firm BerlikLaw, any time you speak to the public, there's a chance you could be sued for defamation. Moreover, he says, “Social media has made widespread publication of defamatory material more common. Lots of cases now are about blog posts and tweets.”
The risk is real, folks. So let’s take a look at what you can do if you’re sued.
What to do if you’re accused of defamation
“The first thing a small-business owner should do when they receive notice of a defamation lawsuit is contact their attorney,” says attorney Mark Clark of Traverse Legal.
If you have a liability policy, your next call should be to your insurer to see if you have coverage for advertising injury. “Oftentimes, even if the coverage is questionable, the insurance company will provide you a lawyer at their expense to defend the claim,” Clark says.
Clark also notes that while your insurance company probably has a list of approved lawyers to handle your suit, but you may not have to limit your choices. “I have been in cases where my client has requested the use of their own attorney," he says. "The insurance company approved and paid for their services in defending a defamation claim because it’s a specialized area."
Pro tip: For any lawsuit, time is of the essence. Lee Berlik says you typically have 21 days to respond to a complaint, depending on your state.
As for the insurance, many providers require prompt notice of a claim. If you don't inform them of a lawsuit in a timely fashion, your coverage may be denied.
How to assist your lawyer in a defamation lawsuit
Olivia Luk, a partner with the law firm Niro Law, says small businesses can best help their lawyer by listening to them and responding to their requests promptly. For example, she says, “If discovery is requested, collecting all requested materials and providing an organized and fully responsive document production would greatly help the lawyer.”
Clark urges small-business owners to hand over everything your lawyer requests, too, saying, “It’s always better to provide more information to the attorney than less. Let the attorney sort out what may be relevant. Don’t skimp on the information.”
Pro tip: Statements made in anger, even if they aren’t defamatory, seldom show people at their best. Still, you want to tell your lawyer everything about your history with the claimant. Berlik says that’s one reason there is attorney-client privilege: “It’s designed to allow the client to tell their attorney the truth, the whole truth, and nothing but the truth.”
The potential aftermath of a defamation lawsuit
A defamation lawsuit costs time and money to defend. “It’s certainly something that is a continual distraction while it’s going on," Clark notes. He estimates that in a worst-case scenario, the price tag for a defamation suit that goes to trial can be in the six figures.
But what about your reputation? According to Clark, the public nature of a lawsuit may put your business’s good name at risk if your competitor decides to publicize your loss. “It can have a devastating effect on your business,” he says.
Pro tip: Olivia Luk points out that a trial of any kind is taxing, but “a defamation case can be a particularly stressful because it is personal to the alleged victim as well as to the alleged defamer.”
She recommends taking steps to avoid the courtroom altogether:
- Counsel employees to be cautious about oral or written remarks about a person or company that could be considered disparaging.
- Include clauses in employment agreements to limit your liability.
- Purchase insurance coverage to pay for your defense.
General liability insurance often covers advertising injuries like defamation. Talk to your agent to be sure you’re covered.
Tweets, posts, likes, and shares have all made it easier for small-business owners to be sued over defamation. Learn why and how to avoid it in “Social media and business risk: Slander, libel, invasion of privacy, and copyright infringement.”
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