What are the downsides to filing a claim in small claims court?
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Mary Martin
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Mary Martin has been a legal writer and editor for over 20 years, responsible for ensuring that content is straightforward, correct, and helpful for the consumer. In addition, she worked on writing monthly newsletter columns for media, lawyers, and consumers. Ms. Martin also has experience with internal staff and HR operations. Mary was employed for almost 30 years by the nationwide legal publi...
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UPDATED: Jul 17, 2023
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UPDATED: Jul 17, 2023
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
We urge you to be very careful before starting any Small Claims action and to consider consulting with a lawyer before you do. For example, before you start a lawsuit consider the following:
There is always the possibility of a “counter claim.” If you sue someone in Small Claims Court, it is usually possible for the person you sue to “counterclaim” which essentially means to sue you back. If so, this can mean that you may not collect on the fender bender, and instead may have to pay the other side’s claim for damages to its car.
Limited damages are available. Every Small Claims Court has a maximum amount it can award. If the maximum amount you can recover in your state’s Small Claims Court is $2,000 and you have the potential to recover $10,000, you would be giving up your right to seek the extra $8,000.
Simplified procedures may hurt you. For example, in Small Claims Court you generally can’t get to examine records that may be very important to your case which the other side – or third parties – have.
Limited rights to appeal. What the judge or court appointed arbitrator says is usually final, even if the judge or arbitrator made a serious error in terms of the facts or the law.
Lack of “punitive damages” and “value as precedent”. If the defendant’s conduct was outrageous, in some instances it is possible for a regular court to award “punitive damages” to punish the defendant and discourage others from similar behavior. Most Small Claims Courts can not award “punitive damages.
Small Claims decisions are rarely useful as “precedent” in other cases involving the same issue or the same party. So if you were just one of many victims of a fraudulent sales scheme or defective product, and you want “to teach the wrongdoer a lesson” a Small Claims action may not be the way to go.
Impact on your other rights. Say you successfully sue for the damage to your car. That may preclude you from recovering anything for the whiplash that you later recognize was caused by the fender bender. Also, if a passenger in your car later sues you, you may not be able to turn around and sue the other driver.
Again, in many cases it may makes sense to consult with an attorney before you bring suit in Small Claims Court.
Case Studies: Insurance Considerations for Small Claims Court Cases
Case Study 1: Counter Claim Impact
John decided to file a small claims court case against his neighbor for property damage caused by a fallen tree. However, he didn’t anticipate that his neighbor would file a counterclaim, alleging that John’s negligence contributed to the tree falling. John’s homeowner’s insurance policy included coverage for property damage claims, and he had the foresight to consult with his insurance provider before proceeding with the small claims court case.
Thankfully, his insurance policy covered both his claim and the counterclaim. As a result, John was protected from potential financial losses and legal expenses, and his insurance company handled the legal proceedings on his behalf.
Case Study 2: Limited Damages Coverage
Sarah experienced a slip and fall accident at a local store due to a wet floor that lacked warning signs. She suffered injuries and incurred medical expenses exceeding the maximum amount recoverable in small claims court. However, Sarah had personal injury liability insurance, which provided coverage for her medical expenses, lost wages, and pain and suffering.
Instead of pursuing a small claims court case, Sarah filed a claim with her insurance company, which then negotiated a settlement on her behalf. By utilizing her insurance coverage, Sarah received the necessary compensation for her losses, even exceeding the limits of small claims court.
Case Study 3: Limited Rights to Appeal
Emily filed a small claims court case against a contractor who performed unsatisfactory work on her home renovation project. Despite presenting strong evidence, the judge ruled in favor of the contractor due to a technicality. Emily realized the limited rights to appeal in small claims court and decided to explore other options. Fortunately, Emily had purchased errors and omissions insurance, commonly known as professional liability insurance.
She consulted with her insurance provider, who guided her through the process of filing a claim. The insurance coverage allowed Emily to hire an attorney and pursue the case in a higher court, where she eventually secured a favorable outcome and received compensation for the contractor’s negligence.
Find the right lawyer for your legal issue.
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Mary Martin
Published Legal Expert
Mary Martin has been a legal writer and editor for over 20 years, responsible for ensuring that content is straightforward, correct, and helpful for the consumer. In addition, she worked on writing monthly newsletter columns for media, lawyers, and consumers. Ms. Martin also has experience with internal staff and HR operations. Mary was employed for almost 30 years by the nationwide legal publi...
Published Legal Expert
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.