ASSET PROTECTION - APROPRIATE LEVELS OF LIABILITY COVERAGE FOR AUTO POLICY

ISSUE: APROPRIATE LEVELS OF LIABILITY COVERAGE FOR AUTO POLICY

This actually comes to me through a relative, who is now in an unfortunate position:

While driving in the middle of the day our friend, “Mr. Good” was struck broadside while crossing an intersection with a green light. The driver of the other car was turning left and failed to yield right of way, striking Mr. Good’s vehicle and injuring himself and causing his own death in the process. The reporting officers at the scene cleared Mr. Good of any wrongdoing and cited the other (deceased) driver noting that he was an elderly man who was driving at a high rate of speed and who had not been wearing his seatbelt when he for some reason broadsided Mr. Good in oncoming traffic. Mr. Good retained counsel and after receiving treatment for his injuries settled with the insurance carrier of the deceased. As far as Mr. Good and his family are concerned it was over. That changed two days ago on Sunday morning when Mr. Good was served with papers by the family of the deceased, at fault driver, seeking to making a wrongful death claim and demanding detailed financial information from Mr. Good. Any wrongful death claim (and worse, potential jury award) will doubtless be in excess of the basic policy that Mr. Good has in place. He is understandably shaken and is now wondering what will be taken from him and how it will affect himself and his family. He has no Asset Protection planning in place, it’s too late to start and he did not have a large liability umbrella.

This is simply one specific example of a million possible scenarios, other examples that I have personally seen in the last 90 days:
- Wife of successful high profile builder blows through stoplight while looking at her Blackberry and injures occupants of several other vehicles;
- Teenager (minor) involved in fatal accident while driving vehicle owned and insured by wealthy parents;
- Owner of business involved in fatal accident on way to lunch, family of deceased seeks recovery against the business he owns because title to car is held by business.

It should also be noted that personal injury attorneys are now explicitly advertising and boasting about the fact that they have prevented defendants from seeking bankruptcy protection against these judgments. One national firm, Goldberg and Osborne has this as the center of a new television advertising campaign. The implication is that even the small amount of wealth that would have been preserved by bankruptcy is within their grasp and is available for recovery, “At no cost to you” a frightening development for those who have no planning in place at all.

Solution:

Carry as much coverage as you can comfortably afford and include a liability umbrella policy. The major expense is always in the base policy. The umbrella is typically an inexpensive add-on that can increase base coverage amounts by several times. Don’t think that this alone is enough however, and understand that to you umbrella means everything, to your carrier; it means specific events up to specific limits. Make sure you have taken steps to protect your personally held assets and income streams and have a back-up plan in case your carrier reduces coverage or excludes the event completely due to some form of contributory negligence, like the fact that you happened to be on your cell phone. Consult your local insurance agent for prices and have them show you in writing what the umbrella covers and excludes.

Beyond that, be a hard target, and do some planning now while the option still exists in a legal and ethical way. It’s not a coincidence that they asked for financial info up front in our first example. Defendants who do not have any assets or who do not have assets easily reachable by predators make poor targets, especially for contingency fee attorneys.

Finally, pay attention to how your vehicle is titled. Having your vehicle titled in the name of your business is very dangerous.

Which of the following three would be most exciting? Getting hit by:
John Smith;
Dr. Smith;
Smith Cosmetic Dentistry Associates.

That’s right – number 3 is the big winner (or loser) a corporate defendant with very deep pockets. What about the tax deduction you were taking on the lease or payments? Simple, give your self a car allowance to cover the cost of the vehicle and have your CPA deduct accordingly, but please do not take the most dangerous activity you repeat on a daily basis (driving) and tie it to the most valuable thing you own – your business!