Do you have a corporation, limited liability company, partnership or other entity filed with the New York State Secretary of State? When the entity was formed you had to appoint the Secretary of State as your agent for service of process. Every entity has to do this. As part of this you listed your address for the Secretary of State to mail process.
What is process? Process in this case refers to a Summons and Complaint issued when someone sues you. How do they commence a lawsuit against a corporation, LLC or other similar entity in New York? One way is to serve the Secretary of State as agent for the Defendant. The Secretary then mails the Summons and Complaint to you at the address you have on file. That is all it takes to commence a lawsuit against your company.
What if you have moved? Unfortunately many companies move and forget to update their address with the Secretary of State. When the Secretary mails process to your old address you don’t receive it, but the lawsuit is still effective and you are in court and don’t even know about it.
This has some serious implications. First, if you don’t respond, the Plaintiff can very easily get a default judgment against you for the full amount they claim in their suit. A decent lawyer can usually get that default vacated, but it takes time and money.
Of a potentially more serious note is an issue where you have insurance that might cover the claim by Plaintiff. Your insurance company will pay for your lawyer and defense and pay for judgments against you up to the limits of your policy. However, you are obligated under the terms of your insurance policy, to notify the insurance company of any lawsuits as soon as practicable. Check your policy for the exact language. A recent decision out of the New York Court of Appeals* holds that any delay in notifying your insurance company that results from you having an invalid address with the Secretary of State is a vaild reason for your insurance company to deny coverage of the claim. Now you are all alone in court facing thousands of dollars in legal fees and the possibility of a ruinous judgment, when all along you thought you had coverage. The Court admits that its decision leads to some harsh results, but they feel their decision will encourage companies to keep their information up to date.
The New York State legislature has amended Insurance Law section 3420 to tip the balance more towards the insured, but it only effects policies issued after January 17, 2009.
Take a moment to check your details with the Secretary of State’s office. You can visit their website and search on your name. If the address is old and no longer valid, we can help you update it, or you can do it yourself, the details are on the Secretary’s website.
* Briggs Ave. v. Insurance Corp., 11 N.Y.3d 377 (2008)