Imagine the following scenario. You pick up your mail one day and there is a letter from a law firm. You open it and find two formal legal documents: a summons and a complaint. The summons officially informs you that you have been sued. The complaint contains the formal allegations made by the plaintiff(s) in the case against you, the defendant or one of the defendants. The allegations arise out of circumstances for which you are insured: an automobile accident (and you have auto insurance), or the mailman was bitten by your dog (and you have homeowner’s or renter’s insurance).
What happens next?
First, Contact Your Insurer
First you promptly contact your insurer. One of the documents you received when you first took out your insurance policy should be instructions on what to do in this situation and how to contact your insurer. If you have lost or cannot find these documents, call the agent who sold you the policy or look in the phone book and call the insurance company directly. Tell them that you have received a summons and complaint (to learn more about insurance agents and what they do, see Insurance Agents: What's the Point?).
Your insurer might already know about the incident over which you are being sued since settlement negotiations will have preceded the formal lawsuit. Even before the settlement negotiations, you will have informed the insurer of the incident and the insurer will probably have investigated and obtained a recorded statement from you. But regardless of whether the insurer already knows about the incident or has investigated, promptly contact them to let them know you have been served with summons and complaint.
The insurer will ask you to mail them copies of the documents. Do this as soon as possible. The insurer will pass these documents on to a law firm that will defend you in the law suit. In short order, you will be contacted by the law firm and will be asked to come to its offices and talk with the lawyer who will handle your case.
Your Lawyer Gets Involved
The three-way relationship among the insurer, the insured (that’s you), and the law firm can be legally complex. I will only cover the basics here.
The insurer has two duties to you: to defend you and to indemnify you (pay any sum you are legally required to pay the plaintiff) up to the policy limits (learn how high your limit should be in Auto Liability Insurance - How Much Is Enough?). Their duty to defend means they will hire a law firm to defend you and will pay all of the fees and costs charged by the law firm.
If your case is complex and takes a long time to resolve, you might come to know your lawyer well over the course of the lawsuit. At the initial meeting, the lawyer will question you thoroughly about the facts surrounding the incident. You might already have given a statement to the insurer, in which case the lawyer will already have received and read a copy of it but the lawyer will still question you in greater depth.
Shortly after this, a process known as "discovery" will commence. The plaintiff’s lawyers will send written questions (interrogatories) to your lawyer, as well as requests for production of documents, requests for admission, and perhaps other writings. Your lawyer will mail these to you along with instructions. After preparing your answers, you will probably meet with the lawyer again to review and discuss them. The plaintiff’s lawyers will also almost certainly send your lawyer a notice of deposition. At your deposition the opposing lawyer(s), your lawyer, yourself, and a court reporter who will record everything said on a shorthand typewriter will be present. You will meet with your lawyer a few days before the deposition so that they can explain and prepare you for the procedure. Once the deposition is over, you will be able to read the transcript.
Arbitration and Trial
If the case doesn't settle during the discovery process, you will likely be required to attend proceedings later, likely including an arbitration and, if the case never settles, a trial. Your lawyer will thoroughly prepare you for all of these events.
Note that with respect to personal injury cases (as opposed to criminal litigation), roughly 95% of them settle before trial, so you will most likely not have to endure one.
Your Insurer's Role
Once your law firm has been hired and you meet with them, you will have little contact with the insurer. An agent of the insurer will be present at any arbitration and at trial, but you will mostly communicate with your lawyer.
Despite the lack of communication, your insurer will be heavily involved in the case. The lawyer will send them regular written reports on the status of the case. And the insurer controls whether money is offered to settle the case and how much is offered. You have no say in this and your lawyer needs the insurer's permission to make offers and must make them if instructed to do so by the insurer. Even if you feel that you did nothing wrong and that the plaintiff was entirely at fault, the insurer will often offer something in settlement to end the case and avoid going to trial.
Lawsuits are no fun, but cooperating with your insurance company and the lawyers it hires for you will ensure that the process disrupts your life as little as possible.