My dad might be sued for an auto accident he was involved in*. His insurance company will cover him up to $100,000 dollars, but he’s worried about what will happen if he loses and has to pay more than that. They can’t touch his retirement money, but his savings are up for grabs.
So, in order to safeguard the money that he’s saved for my college tuition, he wants to give just that amount (around $30,000) to me.
What he’s wondering, and me too of course, is whether the plaintiffs could still come after me for the money, if they win the case for more than $100,000.
I realize that we should talk to a lawyer, and we will next week, but this bugging all of us this weekend and it’d be nice if we could decrease the uncertainty. Any advice would be appreciated.
he hit a person jaywalking in the rain, at night, wearing dark clothing.
Yes, they can still come after him. They can try to get his other assets, such as a house, attached. That’s the purpose of car insurance - to protect your other assets. If you don’t have anything of value, then you can get the state minimum. If you have a house or anything else, then you need insurance that will match the value of those assets.
I don’t know how it works with money in a bank or if there are limits on how much of that can be attached as a winning judgement in a lawsuit.
Anyway, a transfer to a family member while litigation is pending or threatened sets of serious alarm bells:
and UFTA, cited above. (transfers to family members and transfers while litigation is threatend or pending suggest a transfer was made to hinder creditors, especially when the transfer is a gift).
The thing to do is to talk to a lawyer who specializes in asset protection in your state. You can find some books on the subject and there is a lot on the internet about it, but it is a very technical area and each state’s rules are very different. Talk to a lawyer about it.
BTW, it is very likely that the plaintiffs will settle for policy limits before they risk a trial against your father. They don’t know what his assets are, and in most states, aren’t allowed to ask about them until after they get a judgment. Any judgment that they get is at high risk of being discharged in bankruptcy. So most of the time, it’s not worth it.
I’m not your lawyer; you aren’t my client; this is not legal advice; yadda yadda yadda.
Another factor that results in claims being settled within policy limits: Under some circumstances, an insurer that doesn’t settle within policy limits may be held liable for a judgment that is over policy limits if a court finds that the insurer acted in bad faith.
That is the sort of thing that needs to be discussed with a specialist in one’s own state. Thing is, if dad spends $2000 on legal advice, and manages to protect the rest of the money, you are in great shape. If he spends $2000 on legal advice and the lawyer says that there is nothing that can be done, you aren’t much worse off than you were before.
Most if not all states and the federal statutes provide exemptions from execution, that is property a judgement creditor cannot grab. In some states the exemptions are pretty antique (e.g., one yoke of oxen and one musket or shotgun). In some states there are exemptions that afford protections to particular businesses (e.g., farm implements to a value of $1000, life insurance policies). The transfer of property without a fair exchange or the conversion of property into exempt assets after a claim is asserted is sure to set off alarms and suggest a voidable fraudulent transfer. Big important assets are almost universally exempt, e.g., homestead, retirement investments clearly designated such as IRAs and 401K accounts and SEP accounts. Jointly owned assets and assets owned in the entireties are sometimes effectively exempt if not subject to partition and the co-owner is not a judgment debtor. It is a complex question dependent on the particular facts and the local law and whether you are in state court or federal court.
As far as insurance company bad faith is concerned, the insurer has a duty to settle the claim within policy limits but the duty is not absolute. For instance the company may offer its limits and be confronted by a demand for even more. The insurer really can’t do much more that offer limits and jaw on the claimant to take it. The insurers duty is to make reasonable efforts to settle. And if it can’t settle to defend. I don’t know of any circumstances, save non-cooperation by the policy holder that will let the insured avoid its obligation of a vigorous defense. If the claimant is reasonable and the policy limits are close being reasonable compensation for the loss and the defendant does not have any significant non-exempt assets then the case will settle for limits. If, however, there is a catastrophic loss, as when a person is done a permanent injury with a significant impact, for instance when the claimant is young and rendered paraplegic, moderate policy limits may not even cover the first week of medical care – it is possible to run up a $100,000 medical bill in a week or ten days.
If there is a point to all this it is the folly of carrying liability insurance that is not sufficient to protect assets. $100,000 may have been adequate once. Given the inflation of medical costs and nursing home care that is just not adequate coverage today for a person who has any amount of property subject to execution. Increasing auto liability coverage from$100,000 to $500,000 is relatively cheap. An umbrella liability policy of one million dollars is not unreasonable either. Running around with the statutory minimum coverage, often a little as $25,000, is just asking for trouble.
Anyone who walks into this sort of problem needs to seek experienced professional advice right away.
As much as I hate “me too” posts, I’ll vouch for Spavined Gelding .
I was able to carry add a $1 Million umbrella policy to my previous “$250K limit” car insurance policy for a premium increase that amounted to less than 25% of my previous insurance payment. I don’t remember the whole amount, but I was amazed how cheap it was.
Then I remembered that I have no assets, and if I’m not driving maliciously or drunk, I would probably just bankrupt out of any judgements that exceeded a $250K limit on my policy… so I proceeded to drop down to 250K again.
When bankruptcy reform becomes effective this fall, I’ll go ahead and get an umbrella policy again.