No one enters into a new construction project anticipating that it will end with a lawsuit. However, there is always the possibility that a new development or construction project will go south. While you may not be able to predict the job that may ultimately end up in litigation, there are simple steps you can take now to begin preparing your defense and minimize exposure.
1. Form an entity. Take the action necessary to form an entity and conduct your business solely within the confines of your entity.
2. Protect your entity. Regardless of whether you conduct business as a corporation, S corporation, limited liability company or limited partnership, it is important to protect your entity status.
a. Timely renew your business registration. When you receive your entity’s renewal application from the Oregon Secretary of State, return the application, provide any requested information and pay your renewal fee promptly. Do not allow your entity to be administratively dissolved simply because you failed to renew in a timely fashion.
b. Update any changes with the Oregon Secretary of State. Update any changes, such as principal business location or mailing address, with the Oregon Secretary of State. Specifically, confirm your registered agent’s information is accurate, as your registered agent is the one that will be served if a lawsuit is filed.
c. Observe required formalities. If your entity requires formalities such as an annual meeting or meeting minutes, make sure these tasks are completed. Do not fall behind, as it is more difficult to reconstruct actions that were taken or resolutions that were made after the fact.
d. Do not comingle. Do not comingle personal funds with those of the business. Keep your bank accounts separate, keep accurate accountings and document all transactions. Do not give a future litigant any ability to suggest that your entity is anything but a separate legal entity.
3. Evaluate insurance policies before starting each project. Review any insurance policies on a project-by-project basis to confirm that you have insurance coverage for the specific type of work involved. Knowing what your insurance policies do and do not cover can assist you in evaluating the risk of the project.
4. Maintain complete and accurate job records for at least 10 years. When one job ends, you are likely already in the middle of another or moving onto the next. Take time at the end of each job to review your job file, as in certain cases a lawsuit can be filed up to 10 years after job completion. Hand-jotted notes with partial information that are completely clear at the end of a job may be indecipherable 10 years later. Unorganized accountings and invoices will take hours to recreate at a later date, and by that time, it may be too late to locate missing information. Although it may be inconvenient to do at the time, organized and accurate job records are invaluable in the event of a lawsuit.
5. Contact your attorney immediately. Important deadlines begin to run from the date you are served with the lawsuit. If you are served with a lawsuit, contact your attorney immediately.
Michelle maintains a broad practice serving clients in the areas of elder law, real estate and land use, litigation, and estate planning.