What action should a business take when receiving a demand for damages from a client?

When a business receives a demand for damages from a client, notifying their insurance provider immediately is an essential action. This ensures that the insurance company can begin the claims process, which is crucial because the demand may involve potential liability that could lead to financial repercussions for the business. By informing the insurance provider promptly, the business allows the insurer to assess the situation, investigate the claim, and provide the necessary legal and financial support.

Insurance policies often include clauses requiring timely notification of claims or potential claims, and not doing so could jeopardize the business's coverage. Moreover, the insurance provider is usually equipped with the expertise to handle such demands, including determining the validity of the claim and managing any legal proceedings. Engaging with the insurance provider also helps ensure that any response to the client’s demand aligns with the coverage available, potentially mitigating costs associated with the claim.