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Old 01-17-2015, 07:35 AM   #41
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That seems to be a common misunderstanding. There's nothing inherent in liability policies that will protect your assets. I get that someone suing you may find it easier to settle with an insurance company than to fight a person in court who will be very motivated to save his nest egg.

But there's nothing preventing such an outcome. If you disable a moderately good earner with 20 years of earning power remaining, you can easily imagine a judgement that wipes out a million or two of liability insurance and all your reachable assets beyond that.
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Old 01-17-2015, 08:46 AM   #42
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The thread strikes me funny... As everyone talks about millions and lawsuits and how to protect... The question remains: Do you know what the policy covers?

So if: Your 15 year old nephew is visiting and you let him use your all terrain vehicle to ride around the property. He takes your neighbor's daughter for a ride and they roll it on a little hill. She suffers a broken arm and a permanent eye injury.

So if: You hire the local handyman to paint a room. The ladder sinks into a floor soft spot, the ladder falls and he is injured.

So if: Aunt mary slips and falls in your driveway and breaks her hip. She has Medicare and a Supplement.

So if: You're driving 10 miles over the speed limit and cause an accident that causes death to another person.

So if: You are harmed and go to court to sue a meighbor. You lose the case and your total legal fees, his and yours, total $100K.

So if: You work part time, restoring expensive artwork. The art falls from the easel and is destroyed.

Will your policy cover the expense?
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Old 01-17-2015, 08:56 AM   #43
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That seems to be a common misunderstanding. There's nothing inherent in liability policies that will protect your assets. I get that someone suing you may find it easier to settle with an insurance company than to fight a person in court who will be very motivated to save his nest egg.

But there's nothing preventing such an outcome. If you disable a moderately good earner with 20 years of earning power remaining, you can easily imagine a judgement that wipes out a million or two of liability insurance and all your reachable assets beyond that.
So how much of an umbrella policy do you need? is it 2x,3x,5x your unprotected net worth? what if it's not enough?

Is there any data showing how much the courts awarded plaintiffs for personal injury cases? what percentage of cases are awarded multi million dollars?
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Old 01-17-2015, 09:05 AM   #44
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I've probably naively assumed our umbrella covers "everything" the auto and standard homeowners doesn't. I'd be interested to see one or our experienced attorneys or similarly qualified members answer Imoldernu's scenarios.....
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Old 01-17-2015, 09:59 AM   #45
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I have no legal or insurance background. But here is my understanding of the scenarios

Quote:
Originally Posted by imoldernu View Post
The thread strikes me funny... As everyone talks about millions and lawsuits and how to protect... The question remains: Do you know what the policy covers?

So if: Your 15 year old nephew is visiting and you let him use your all terrain vehicle to ride around the property. He takes your neighbor's daughter for a ride and they roll it on a little hill. She suffers a broken arm and a permanent eye injury.

Answer: Homeowners Insurance first and then umbrella for the rest

So if: You hire the local handyman to paint a room. The ladder sinks into a floor soft spot, the ladder falls and he is injured.

Answer: I don't think so - or it depends. When you hire a contractor to do a job, there is an understanding that they carry insurance for work related injuries (or at least are responsible for them). There may be some distinction if this is your friend Joe from down the road who came to help you out and maybe you fed him pizza for his trouble.

So if: Aunt mary slips and falls in your driveway and breaks her hip. She has Medicare and a Supplement.

Answer: Yes. Homeowners first and then umbrella. The fact that she has other insurance does not negate the fact that she can make a claim against your insurance. Most medical insurance companies would also make a claim against your homeowner's insurance to minimize their costs, but I'm not sure if Midicare does this.

So if: You're driving 10 miles over the speed limit and cause an accident that causes death to another person.

Answer: Yes. Auto insurance first and then umbrella

So if: You are harmed and go to court to sue a meighbor. You lose the case and your total legal fees, his and yours, total $100K.

Answer: Had not thought of this, but I wouldn't think so. Umbrella is liability and does not cover injury to you. You went to court because you thought that someone else was at fault, but apparently the legal system didn't think so. I see no reason your liability insurance would kick in.

So if: You work part time, restoring expensive artwork. The art falls from the easel and is destroyed.

Answer: Probably not. At least not under a personal umbrella policy. Personal umbrella policies do not cover business liability. If I were doing this type of work, I would check with my insurance company to see if I could specifically include it. Most likely I would need to get a business policy to cover it.

Will your policy cover the expense?
For that last one, here is my personal experience. I used to have an umbrella policy through USAA. Then I bought a farm. USAA declared the farm a business and wanted nothing to do with insuring anything to do with the land including specifically saying that it was not covered under the umbrella. At the time I got a separate commercial insurance that let me put a $2M liability coverage on the property (before I carried $500K under homeowners and $1M umbrella).

Now I've switched all my insurance over to Farm Bureau - they are used to insuring farms and I don't have to have a separate policy to maker sure my farm activities are covered.
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Old 01-17-2015, 10:12 AM   #46
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For the art restoration gig - I had assumed that was being done as a self employed gig. If you are a W-2 employee working for someone else, the person you work for would be responsible for damages.
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Old 01-17-2015, 10:35 AM   #47
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....snip.... stuff I have no knowledge of....
Is there any data as to how much the courts awarded plaintiffs for personal injury liability cases? what percentage of cases are awarded multi million dollars?
Don't have real numbers, but did have to sue an insurance company who's driver rear ended me. Their rep refused to settle so I had no choice. The attorney I used said the 'norm' was 3x quantifiable losses. That's about what I was awarded, of course the attorney took a third of it.

Back about '80 I served on a jury in a personal injury case. The plaintiff had an unfortunate slip(wet floor, no sign), at the top of an escalator. We the jury found the mall 90% responsible. Well then it came time to decide the amount. That poor gal didn't even get her medical bills paid for. Nothing for lost wages, pain and suffering. I was livid, argued and fought all I could. It was very clear the other folks based their opinion on a sickening bias.


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Old 01-17-2015, 11:26 AM   #48
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I was told something similar by my insurance agent when discussing how much umbrella coverage to carry. He said as long as your total liability coverage is greater than exposed assets, it is "extremely rare" for settlements to exceed the liability coverage. I asked him why a plaintiff would stop at the amount of coverage, if they had a strong case? He said a personal injury attorney would much rather settle quickly for the amount of insurance coverage than risk a prolonged jury trial over personal assets.
If the attorney would rather settle for insurance coverage limits rather than a jury trial, then why not have lower limits? It shouldn't matter if you have a $500K, $1M or $2M limit if their target is your limit. Let's say you have $1M in vulnerable assets, isn't it the same going after that independent of your insurance limit?
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Old 01-17-2015, 12:16 PM   #49
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So how much of an umbrella policy do you need? is it 2x,3x,5x your unprotected net worth? what if it's not enough?

Is there any data showing how much the courts awarded plaintiffs for personal injury cases? what percentage of cases are awarded multi million dollars?
i don't have a great way of answering the question. Ideally one could look at some data to help understand the relative likeliness of awards of various sizes. Then you could determine how much you are willing to pay to mitigate the various risks. WHen I looked into doing that, I didn't find much in the way of data.

Of course the insurance companies have this data, and you can impute an upper bound for their take on your risk based on the price of their policies. One odd thing I found is that the cost per million of coverage gets lower at first as you add more coverage but then gets much higher. In my investigations, 10MM of coverage was much more than twice the price of 5MM. Yet 5MM was less than twice the price of 2.5MM. I suspect they are worried about informaition assymetries for people who are trying to buy that much coverage.

Another approach would be to try to size the risks you think you realistically face in your own world. Obviously this is an art not a science since we don't have crystal balls, but we do know some things about our lives that can help. I don't have a swimming pool, or a trampoline, or a dangerous dog, or a handgun, etc. But I do have a car, and I do have a kid, and someday I'll have a kid with a car. Killing or disabling a breadwinner is probably one of the biggest risks that I'm regularly exposed to. Given the typical salaries in this high cost of living area, such a tragedy would almost certainly consume a one or two million dollar policy with plenty of claim to go.

So, repeating what I said before, I don't have a great answer. I will say that I'm more comfortable with a $5MM policy than I would be with 1 or 2. Like your mileage, your risk tolerance may vary.
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Old 01-17-2015, 12:35 PM   #50
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Since there seem to be some fairly knowledgeable insurance wonks on this thread, let me throw this one out there for everybody. Anybody know of a company that will cover homes in FL, MD, and VA, with FL being the primary residence? When we started snowbirding and changed our primary residence to FL, our insurance situation went to hell in a hand basket and I'm having fits trying to get it set back up properly. Florida homeowners companies don't seem to extend coverage second homes in other states, and since liability insurance normally is based from the primary residence I've ended up (unknowingly until recently) with no liability on the other homes. And not having liability precludes being able to get umbrella insurance. I've gotten some quotes for policies with liability on the second home, but the total insurance bills are going to be so high as to negate the tax savings of living in FL. It might actually be a better deal financially to make MD our primary rez and just insure the FL home separately.

Is anybody else in this situation, and if so, how did you deal with it?
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Old 01-17-2015, 08:10 PM   #51
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If the attorney would rather settle for insurance coverage limits rather than a jury trial, then why not have lower limits? It shouldn't matter if you have a $500K, $1M or $2M limit if their target is your limit. Let's say you have $1M in vulnerable assets, isn't it the same going after that independent of your insurance limit?
Sorry. I don't fully understand your question. But in general, yes, the intent of the statement by my agent was to offer a rationale for the oft-quoted asset-based umbrella coverage, and to prevent me from buying more coverage than warranted by real-world percentages. I cannot explain why... but he was very clear that liability coverage equal to or slightly exceeding exposed assets was adequate to protect personal assets in the vast majority of personal injury cases. Apologies if I misunderstood your question.
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Old 01-17-2015, 08:35 PM   #52
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So what are the ballpark figures for the premiums, say per $1 million in umbrella?
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Old 01-18-2015, 09:19 AM   #53
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i don't have a great way of answering the question. Ideally one could look at some data to help understand the relative likeliness of awards of various sizes. Then you could determine how much you are willing to pay to mitigate the various risks. WHen I looked into doing that, I didn't find much in the way of data.

Of course the insurance companies have this data, and you can impute an upper bound for their take on your risk based on the price of their policies. One odd thing I found is that the cost per million of coverage gets lower at first as you add more coverage but then gets much higher. In my investigations, 10MM of coverage was much more than twice the price of 5MM. Yet 5MM was less than twice the price of 2.5MM. I suspect they are worried about informaition assymetries for people who are trying to buy that much coverage.


Another approach would be to try to size the risks you think you realistically face in your own world. Obviously this is an art not a science since we don't have crystal balls, but we do know some things about our lives that can help. I don't have a swimming pool, or a trampoline, or a dangerous dog, or a handgun, etc. But I do have a car, and I do have a kid, and someday I'll have a kid with a car. Killing or disabling a breadwinner is probably one of the biggest risks that I'm regularly exposed to. Given the typical salaries in this high cost of living area, such a tragedy would almost certainly consume a one or two million dollar policy with plenty of claim to go.

So, repeating what I said before, I don't have a great answer. I will say that I'm more comfortable with a $5MM policy than I would be with 1 or 2. Like your mileage, your risk tolerance may vary.
I found some information on injury settlements and jury awards in my county which is in a high cost of living state:

# of cases 151
Average award $741,913 (inflated due to a $33 Million award against a gangster for wrongful deaths and few 5-7 Million medical malpractice awards)
Median award $15,500 (probably a better stat than average)

We don't have a swimming pool, no kids in the house, no dogs and a perfect driving records. And since I don't hire any uninsured contractors we fall in the low risk pool and our current $1 Million umbrella to supplement the basic liability coverage would be sufficient.

If we get a judgement in excess of $1.5 million which based on the above data is unlikely and if they decide to come after our unprotected assets we should still be OK.
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Old 01-18-2015, 09:20 AM   #54
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So what are the ballpark figures for the premiums, say per $1 million in umbrella?
My premium is $368 for 1 Million policy.
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Old 01-18-2015, 09:42 AM   #55
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$5 million umbrella coverage for $395 annually
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Old 01-18-2015, 11:21 AM   #56
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Since there seem to be some fairly knowledgeable insurance wonks on this thread, let me throw this one out there for everybody. Anybody know of a company that will cover homes in FL, MD, and VA, with FL being the primary residence? When we started snowbirding and changed our primary residence to FL, our insurance situation went to hell in a hand basket and I'm having fits trying to get it set back up properly. Florida homeowners companies don't seem to extend coverage second homes in other states, and since liability insurance normally is based from the primary residence I've ended up (unknowingly until recently) with no liability on the other homes. And not having liability precludes being able to get umbrella insurance. I've gotten some quotes for policies with liability on the second home, but the total insurance bills are going to be so high as to negate the tax savings of living in FL. It might actually be a better deal financially to make MD our primary rez and just insure the FL home separately.

Is anybody else in this situation, and if so, how did you deal with it?
If I were you I'd post this as its own thread, here and at Bogleheads in the personal finance subforum. You can't be the only person dealing with this.
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Old 01-18-2015, 12:07 PM   #57
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I also have no legal background...here are a few other things to consider:

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Originally Posted by Aeowyn View Post

Originally Posted by imoldernu
So if: Your 15 year old nephew is visiting and you let him use your all terrain vehicle to ride around the property. He takes your neighbor's daughter for a ride and they roll it on a little hill. She suffers a broken arm and a permanent eye injury.

Answer: Homeowners Insurance first and then umbrella for the rest

Wouldn't this also fall back on the 15 year old's parents? If your minor child injures someone, doesn't it revert to the parents' insurance? So the lawyer would sue both you and your nephew's parents. Unless your ATV was defective, I would see the lawyer making a claim that the bulk of the fault lays with the teen/teen's parents. But you know how juries can be...

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Originally Posted by Aeowyn View Post
So if: You hire the local handyman to paint a room. The ladder sinks into a floor soft spot, the ladder falls and he is injured.

Answer: I don't think so - or it depends. When you hire a contractor to do a job, there is an understanding that they carry insurance for work related injuries (or at least are responsible for them). There may be some distinction if this is your friend Joe from down the road who came to help you out and maybe you fed him pizza for his trouble.
But if the lawyer can show that you (the homeowner) knew that you had a soft spot in the floor, or were somehow negligent in maintaining your house, there could be some liability exposure. Workman's Comp would cover your injury while working - but your WC insurance carrier (if the handyman even had it) would possibly argue that the injury was caused solely by your floor. It's not like the handyman was doing acrobatic maneuvers on the ladder and the handyman didn't grip his ladder rung tight enough and fell - he only fell because of your bad floor.


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Originally Posted by Aeowyn View Post
So if: You're driving 10 miles over the speed limit and cause an accident that causes death to another person.

Answer: Yes. Auto insurance first and then umbrella
As noted, I'm not a lawyer or insurance industry person, but I do know that there is a very bad result if an insurer can prove you were negligent in your actions. And if negligence is involved, some liability protection could be negated. Check your umbrella policy. I say this based on the LLC corporate designation - legally, an LLC shields your personal assets from the activity of the business...UNLESS someone can prove criminal negligence or intent of negligence. In that scenario, your LLC does not shield your personal assets. In the same way, there might be some catches where insurance policy may/may not cover criminal activity or negligence. And I don't know what may define "criminal activity" - perhaps a certain level of felony?

Quote:
Originally Posted by Aeowyn View Post
So if: You work part time, restoring expensive artwork. The art falls from the easel and is destroyed.

Answer: Probably not. At least not under a personal umbrella policy. Personal umbrella policies do not cover business liability. If I were doing this type of work, I would check with my insurance company to see if I could specifically include it. Most likely I would need to get a business policy to cover it.


Getting back to negligence - the lawyer would try and argue that you placed it on the easel in a negligent, haphazard way.

In all of the cases, it costs the lawyer very little other than their own time to sue you and claim negligence in a variety of situations. Whether you were truly negligent or not is in the eye of the jury. But they will still probably at least try that angle. If the lawyer is successful in just 10% of the cases proving negligence, that one payday is enough to pay for the other 90% of the time that they fail in proving negligence.

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Originally Posted by MRG View Post
Back about '80 I served on a jury in a personal injury case. The plaintiff had an unfortunate slip(wet floor, no sign), at the top of an escalator. We the jury found the mall 90% responsible. Well then it came time to decide the amount. That poor gal didn't even get her medical bills paid for. Nothing for lost wages, pain and suffering. I was livid, argued and fought all I could. It was very clear the other folks based their opinion on a sickening bias.
This is what worries me - not your particular case of the jury being "biased", but a random pool of jurors feeling much more sorry for the plaintiff than their injuries warrant, and 'sticking it to the wealthy retired guy' to make up for the injuries. You or your insurance company have no way of knowing what those 12 random people will think or feel when evaluating a decision. Or even a judge's feelings/view, if it's a solitary judge presiding over the award.
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Old 01-18-2015, 02:41 PM   #58
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My premium is $368 for 1 Million policy.
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$5 million umbrella coverage for $395 annually

Quite a disparity there.

What are the carriers involved?
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Old 01-18-2015, 03:29 PM   #59
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For the case of someone self employed restoring artwork and damaging a painting...

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Getting back to negligence - the lawyer would try and argue that you placed it on the easel in a negligent, haphazard way.
I have no doubt that you could be sued for this. But I rather doubt that a personal umbrella policy will cover you. Most likely you will need a commercial policy to cover this activity.
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Old 01-18-2015, 03:42 PM   #60
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Quite a disparity there.

What are the carriers involved?
You have to compare the total cost of policies including home and auto before determining the real cost. Some companies will charge higher premiums for auto and home and lower for umbrella or visa versa.
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