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What should you do when you receive a demand letter?

On Behalf of | Jan 11, 2024 | Insurance Defense News

When something goes wrong and someone ends up hurt, plaintiffs might come knocking, seeking compensation for the damages they’ve suffered. Although that’s a 10,000-foot view how civil litigation can kick off, you need a stronger understanding of the process so that you can effectively navigate it while protecting your best interests. This week let’s take a closer look at the demand letter and what to do once you receive one.

What is a demand letter?

A demand letter is straightforward. It’s a written request issued to you asking you to pay certain damages, otherwise civil action will be taken against you. The letter should lay out the facts of the dispute, and it really should be the initiation of negotiations to see if there’s a way to resolve the matter without the need for formal legal action.

This letter will likely be strongly worded, too, as the purpose behind it is to convince you that you have little chance of succeeding in litigation and are better off resolving the case now, even if that’s not the truth.

What should you do when you receive a demand letter

You shouldn’t ignore a demand letter when you receive one. Instead, you should consider doing the following:

  • Analyze the claims made in the letter to see if they’re valid or if there is dispute as to material facts.
  • Figure out what the true intent behind the letter is, as parties may have various motivations in sending a demand letter.
  • Consider your options, which may include complying with the demand, negotiating a less impactful outcome, or denying the request altogether.
  • Draft a formal response that clearly and professionally conveys your position while keeping in mind that your response can be used against you in court.