What to Do If You Receive a Letter of Demand

What to Do If You Receive a Letter of Demand

If an incident occurs and a third party believes you or your business is responsible for personal injury or damage, and they decide to seek compensation, your company will likely receive a Letter of Demand (LOD).

A LOD can come in many forms e.g. email, phone call, conversation in person etc, and is a formal notice demanding that the person to whom the letter is addressed, perform an alleged legal obligation such as rectifying some identified problem, paying a sum of money or acting on a contractual commitment.

Most demand letters will include a deadline for action, and are often used to prompt payment, avoiding expensive litigation. A demand letter often contains a “threat” that if not adhered to, the next communication between the parties will be through a court of law in the form of formal legal action.” No matter how far-fetched a claim may appear, whether you believe it happened or not, it is not something to ignore.

If your company fails to address the issue early, the case could end up in court, where legal expenses can very quickly escalate into tens of thousands of dollars – even if you’re not at fault.

Public and Products Liability insurance is designed to protect you and your business from the significant costs associated with any legal action because of your actual or alleged negligence that has caused third party property damage or personal injury.

Insurance will not prevent liability but will help save your home, your savings, and your property if a claim or a lawsuit is brought against you for which the policy applies.

To help ensure your Public Liability Insurance policy responds effectively if you receive a LOD, we recommend following these four key steps:

1. Don’t ignore it
Legal costs, excessive damages and mental angst settlements can all be awarded if the accusation ends up in court not to mention reputational damage and limited insurance coverage offered at renewal.

2. Notify your insurance broker immediately
Once your business notifies your insurance broker, the insurer will generally take care of the whole issue from the start on your behalf, removing the need for direct involvement in the dispute.

3. Do not respond to the letter personally and do not admit liability
You should never admit liability (fault) for the incident associated with the LOD. This could leave you open to legal action for damages. It could be almost impossible to argue your case if guilt has already been admitted.

4. Do not pay the demand
Paying the demand could be interpreted as an admission of guilt, leaving you vulnerable to further legal action.

Give Carollo Horton a call on 1300 227 655 to discuss your options and ensure you a properly covered if the need arises.

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