How can one escape being sued? I am concerned that in the case of an automobile accident, I could lose all of my assets. Likewise, suppose somebody slips on the front steps, and consigns me to legal hell!
I read a book a few years back (“CITIZEN COHN”, by Nicholas Von Hoffman). It is the life story of the late Roy Cohn, of McCarthy-era fame. What interested me about Mr. Cohn, was that nobody, apparently ever got a dime out of him in a lawsuit. In fact, he was brought into court several times, by the IRS-they finally gave up trying to get him for income tax evasion. In another case, a man was killed on a yacht that Cohn “leased”- his wife never collected a cent, as the yacht was owned by one shell company, leased to another, and never could any ownership be assigned to Cohn himself. It seems his secret was that he never owned anything-he was always able to control assets without legally owning them. This apparently worked well for him, as lived a lavish lifestyle-of course his creditors were always frustrated-they always found that he rarely paid them. So, the question is how to shield yourself from lawsuits. Are there legal ways to do this? How does somebody with a six-figure income get away with this?
You could start your own corp, Eg, and transfer ownership of every thing to that.Make sure it is a legitimate corp though. You might wanta look into some automobile liability insuarance and a homeowners policy too. Move to a state like Texas that has set liability limits, that’s greatfor me when it is my fault you got hurt but not so good when it’s your fault I got hurt.These limits get me all upset when I think about them, it makes my blood pressure skyrocket. I think I’ll sue you for reminding me,don’t think you can hide behind the SD, I am gonna sue them too, and Unca,and AOL,and even the TM! YAHAHA! Hey ,it’s only a dollar each.
“Pardon me while I have a strange interlude.”-Marx
I know that in general, liability insurance is used to protect yourself from these situations - auto insurance for the car wreck, home owners for the slipping-on-the-sidewalk situation. You can also get ‘umbrella’ policies (standard amount = [dr. evil]$1 million[/dr. evil])
I believe that when your insurance covers the situation that the insurance company will provide the lawyer, but perhaps Melin or one of our other lawyer friends (ColonelJD?) can help with this.
I do not know what happens if your assets are less than your liability coverage and you get sued for more than your liability coverage. I assume if you have more assets than coverage that they can come after you. Legal folks?
Yes, in fact there are ways to protect your assets from legal predators. The best piece of advice I can give you is:
SEE A LAWYER!
Sorry for the shouting. I am not a lawyer, but I got some advice from a lawyer friend of mine and from a lawyer student of mine, so this is second hand info. You want to be serious about it … go see a lawyer and pay the couple hundred bucks to protect your assets!
There is something called the Homestead Act which can be used to protect your home from creditors and lawyers.
From a letter they sent me.
From the same letter:
Also, you can have a trust established and have your valuables owned by the trust which can also provide some protection from creditors and lawyers.
If you are serious then go see a lawyer.
“Glitch … Window, large icons.” - Bob the Guardian
The concept is making yourself judgement-proof, so that even if you lose a lawsuit, the winner cannot collect on his judgement.
There are a number of ways to do this… all of them come with their own risks. If you place your assets in someone else’s name, for instance, you might be placing them beyond the reach of the creditor, but also beyond your own control. Your partner in crime could decide to screw you over and abscond with his new-found riches, and you’d be without a remedy.
One of Cohn’s solutions (and he was, by all accounts, not a paragon of integrity) was to create shell corporations, controlled by other shell corporations, and hide behind the layers. This is not a perfect solution, but is does require that your opponent have enough tenacity to dig and continue to dig. Cohn, a lawyer himself, took perverse pleasure in filing dilatory motion after dilatory motion in an effort to frustrate his would-be creditors. Even when they were successful in getting a judge to “pierce the corporate veil” and hold the owner responsible… the owner would turn out to be another corporation.
Another method of safeguarding your assets is by over-insuring. You raise the spectre of losing all your assets as the result of an auto accident. That’s possible, but not likely; often the plaintiff will sue to the limit of your insurance policy and not farther, under the theory that the insurer can easily pay, but that you cannot.
Carrying a high level of insurance (I have a friend who has a $1 million auto liability policy) ensures that the insurer (ha!) will be highly motivated to avoid a liability judgement against you in the first place, and, if you should lose, that your assets are unlikely to be up for grabs.
In general, of course, one should avoid lawsuits by not committing tortious acts upon others, thus saving everyone a load of heartache.
- Rick
Making yourself “judgment-proof” is complicated and tricky, and may not be successful in all instances. Unless you have LOTS of money, it’s probably not worth it.
The two best pieces of advice I can give are (1) don’t do anything to get sued, and (2) failing that, make sure you have plenty of insurance. (3) Hi Opal!
What is “plenty” of insurance? Well, that depends on where you live and what you own. Many states have “no-fault” auto insurance, which means that in the normal run-of-the-mill auto accident the person who is injured is compensated by his/her own insurance company, and cannot sue. There are exceptions to this in every state (and province) that has no-fault, though. In fact, one of the criteria often used for determining whether a lawsuit can go forward is the dollar amount of the special damages (medical care, lost wages) suffered. So, obviously, if you get sued in those circumstances that will automatically mean a significant amount of money is at stake.
Liability insurance is the best way to protect yourself. And don’t just buy the minimum policies offered or required if you can help it. If you have assets (house, boat, stocks, bank accounts, even wages from your job if it is more than a modest living) to protect, then don’t settle for an auto policy that provides only, say, $15,000/$30,000 in coverage, which is the minimum required by law in California. (What these limits mean is that the policy will pay up to $15,000 per each person injured in any one accident, up to a total of $30,000 for that one accident.) The initial cost is the worst in auto insurance – adding higher liability limits generally costs less than you think. Ask your agent.
Buy homeowner’s insurance (if you have a mortgage the bank is gonna require it anyway); at least in California your policy which pays you if your house burns down will also provide you with liability insurance up to $300,000 per accident, and you can buy higher limits for little extra money.
Then, depending on your circumstances, buy an umbrella/excess policy. This policy will provide you with some coverages that are not available on your auto or homeowner policy, and it will also provide you with an extra layer of protection over those policies. A typical policy is indeed $1,000,000 in coverage, but the company I work for sells a package that includes an umbrella/excess policy (for wealthy insureds) with $5,000,000 in coverage. These policies will require you to maintain high limits on your “underlying” or “primary” policies (the auto and homeowners). As an example, I have $500,000 as a limit on both my auto and homeowner’s policy, and I have an umbrella policy – which costs about $200 per year – that provides an additional $1,000,000 in coverage.
Incidentally, if you do not own a home, you can purchase renter’s insurance, which is a good thing for you to have anyway. It will cover your personal possessions, and it will also provide you with the same type of liability coverage that a homeowner’s policy does.
In sixteen years of practicing law, I’ve never seen an accident case against an individual that couldn’t be resolved for these types of limits.
Generally, when you are sued, one of the things that the plaintiff can find out about you is how much insurance you have available. Unless you are quite wealthy, most cases against individualst that are covered by insurance are going to settle within the limits of your insurance policy. Most plaintiff’s attorneys know that there’s not much point in going after somebody for amounts in excess of the policy.
Someone asked about lawyers – yes, the typical insurance policy will provide you with a lawyer – of the insurance company’s choice – to defend you if you are sued. If you have an accident, or if someone is hurt on your premises, that sort of thing, you should notify the insurance company right away, even if you think that it is nothing. Some states have strict “notice” requirements, which means that you have to let the insurer know as soon as something happens which might give rise to a lawsuit against you (New York is particularly strict on this). It’s better to give notice and have nothing happen than the other way around.
If you are sued, you IMMEDIATELY call your insurance company and send the complaint to it – there are time limitations on when the complaint has to be answered. If the claims against you is covered, or potentially covered, then unless there is a conflict of interest the insurer will appoint a lawyer to defend you. The insurer has the right in these circumstances to control the litigation, which in its most basic sense means that they can settle it even if you don’t think the other guy should get a dime.
If there is a conflict of interest, in most states the insurer will let you know and you will have the right to choose your own lawyer, and the insurer will have to pay the bills for that. You do not HAVE to choose your own lawyer, you can let the insurer do it, but you have that right.
Some things cannot be insured, and the rules on this vary from state to state. Some states say that insuring punitive damages is against public policy, and forbid this (California is one of these). Some states, such as – I think Wisconsin – allow for punitive damages to be insured.
Incidentally, if your insurance company initially tells you that the claim against you isn’t covered, and it’s not crystal clear to you why that is so, spend the time to talk to a lawyer about it, and maybe have him/her send a letter inquiring about it. In many, but not all, cases, there are things which might have been overlooked in the initial review which the lawyer can call to the insurer’s attention and perhaps get a different decision.
Yikes-- what a long post – anybody still with me??
Hope this helps.
-Melin
Still with you. Long posts are fine, when nothing less will do.
Excellent job, Melin.
Yes, well spoken, kinda like a lawyer might say
I might add, the only people who like courtrooms are judges & lawyers.
Then there is the method I use. I am absolutely judgement proof. While it is not impossible that someone might sue me, he could never get enough to pay a lawyer for the time to file the suit. While I might not be able to afford a lawyer, I could certainly make it to court enough times to get a continuance or two.
Since I live across the street from the local courthouse, showing up for a dozen court dates is a piece of cake. For all this, they could appropriate my entire net worth. That runs to triple digits on paydays, but most times, you can forget getting carfare for your expert witnesses out of it.
Nothin’ ain’t worth nothin’, but it’s free.
<P ALIGN=“CENTER”>Tris</P>
The trouble with being in the rat race is that even if you win, you’re still going to be a rat.
– **Lily Tomlin [/b