Frequently Asked Questions
- How does a personal injury lawsuit naming a public entity as the defendant differ from a lawsuit naming a private party as the defendant?
- Can an insurance company be sued for bad faith by a third party?
- I run a small business and can't afford to have in-house legal counsel, much less a full-time legal department like large corporations have. How do I defend myself if I am sued?
Q. How does a personal injury lawsuit naming a public entity as the defendant differ from a lawsuit naming a private party as the defendant?
A. While substantive issues such as proof of fault and damages may be handled similarly, there are significant differences in procedures. When the defendant is a private party, the plaintiff may immediately file a lawsuit in court. However, when the defendant is a government entity, whether a municipality, the state itself, or a federal agency, the state or federal Tort Claims Act will control. Under the California Tort Claims Act, the plaintiff must first file a claim with the governmental agency, usually within six months of the incident. The government has 45 days to accept or reject the claim. Only if the claim is rejected may the plaintiff proceed to court, and this must generally be done within six months of receiving notice from the government. Contrarily, in most negligence cases involving private parties, the plaintiff has up to two years from the date of the injury to file a lawsuit.
Q. Can an insurance company be sued for bad faith by a third party?
A. No. The cause of action known as insurance bad faith is based upon an implied covenant of good faith and fair dealing implicit in every contract, including an insurance policy. An insurance company does not have any contractual relationship with the third party, so there is no basis for a bad faith claim. A lawsuit alleging insurance bad faith can only be brought by the insured.
It is true that insurance companies generally have a duty to defend an insured against lawsuits brought by third parties, and that duty may include the duty to accept a settlement demand made by the third party, if it is within policy limits and is reasonable in light of the damage caused and other factual issues. If the insured thinks the insurance company is acting unreasonably in refusing to settle, the insured may have a bad faith claim, but the third party is generally limited to recovering only under the negligence lawsuit itself.
Q. I run a small business and can't afford to have in-house legal counsel, much less a full-time legal department like large corporations have. How do I defend myself if I am sued?
A. In-house legal departments spend most of their time handling business and legal transactions and personnel matters. When large corporations are sued, even companies with full-time legal staff will often hire outside counsel who are professional litigators to represent them. Although you can engage in many prudent and preventative practices, as a business owner there is no way you can stop someone from suing you. When litigation does present itself, the key is to immediately contact a skilled trial lawyer who is experienced in the type of case you are facing. Business disputes are inevitable, and litigation fees are sometimes an unavoidable cost of doing business.