By most standards, Lisa and Joe are living the American dream. Hard-working professionals, they have three children, a pet chocolate Lab, a combined annual income of about $450,000, a 10-room colonial in the suburbs and a cabin in the mountains — about a three-hour drive from their primary home. The colonial is appointed with valuable antiques and original artwork, and the cabin sits on four acres of zoned land.
They own three late-model vehicles, one of which their two teenagers share for driving to school or part-time jobs. The parents and kids alike enjoy entertaining, including use of the backyard swimming pool at the main house and a trampoline at the cabin.
Believers in doing good while doing well, Lisa and Joe are engaged in their children’s activities and active as volunteers in their community. Lisa coaches their daughter’s soccer team, and Joe is on the board of a conservation group that owns properties used for recreational activities.
Life is sweet.
But what if one day the family’s normally mild-mannered pet is startled by one of the kids’ visiting friends and bites the guest, causing a laceration that leads to stitches? Or one of the teens steps on the gas instead of the brake and drives through the plate-glass front of the swanky downtown bistro? Or a neighbor in the mountains sustains multiple fractures on the trampoline?
What if the cleaning person the couple let go to get the kids to help out more around the house claims she was fired as an act of discrimination? Or an overworked Joe doses off while driving up to the mountains and causes an accident resulting in serious injuries to another couple? Or the owner of the auto-repair shop that Lisa gave a bad online review says the review is the reason for the shop’s dramatic loss of business? Or an opposing player blames her for the racist remarks some of her daughters’ teammates made during one of the soccer team’s games? Or Joe’s board is accused of negligence after a hiker falls off a slippery boardwalk on one of the conservation group’s properties?
With so many assets, wouldn’t Lisa and Joe be inviting targets for a lawsuit if one or more of those things happened? Wouldn’t they be in danger of losing their savings, their homes, their antiques and artwork … everything? Is the answer to live in a sort of bubble – forgoing favorite activities, remaining on the sidelines instead of participating in volunteer activities, denying friends and family the toys and gatherings they’d dreamed about when they were kids?
Lisa and Joe don’t worry about that. They’re able to maintain peace of mind while living active and occasionally adventurous lives because they exercise common sense and practice good risk management – including protecting themselves and their assets with personal umbrella insurance.
Real-Life Assets, Risks and Protection
Joe and Lisa are a fictitious couple, but risks of a liability lawsuit resulting from the kinds of scenarios we’ve described are real, as authors Patricia Mertz Esswein and Kimberly Lankford explain in detail in the 2019 Kiplinger article “11 Reasons You Need Umbrella Insurance Right Now.”
For a relatively inexpensive premium — usually between $150 and $350 annually for extended coverage limits starting at $1 million – you can protect yourself and your family from the type of legal judgment that could cost you everything you own. In short, personal umbrella insurance enables you to secure your future and live your life.
Let’s say your homeowners policy has a liability limit of $100,000 and a guest successfully sues you for $200,000 after suffering an injury on your property. Your homeowners policy would pay the $100,000 limit, and the umbrella would cover the balance. Similarly, if your teen driver were to cause an accident resulting in damages that exceeded the auto policy limit, your umbrella policy would pay the difference.
In addition, umbrella insurance may cover damages for claims excluded under a home, auto or watercraft policy. If, for example, you were sued for libel because of something your son or daughter posted in social media and coverage was excluded under your homeowners policy, an umbrella could provide the needed coverage.
Personal umbrella insurance also covers attorney fees and defense costs that exceed underlying coverage, and it can cover costs resulting from a policyholder’s auto accident when the driver at fault is uninsured or under-insured, or when the policyholder is the victim of a hit-and-run.
Social Inflation and Nuclear Verdicts
In an October 2020 article titled “What Exactly Can Be Taken From You in a Lawsuit?”, Forbes noted that an unfavorable verdict could cost a defendant assets including homes, cars, life savings and “anything you have left.”
Using one Illinois attorney as an example of aggressive litigation lawyers who know how to reveal all of a defendant’s assets, Forbes reported, “When Mario Iveljic, a partner at Mag Mile Law, issues a citation to discover assets in Illinois, he leaves no stone unturned. His firm asks for all checking and savings accounts, partnership agreements and records of partnerships, real estate (including timeshares), trusts, contents of all safety deposit vaults, title to all properties and a complete list of jewelry, art objects and personal property.”
Exposing a defendant’s full net worth enables Iveljic and attorneys like him to capitalize on what’s known in the insurance and legal industries as “social inflation,” the phenomenon of escalating insurance claims resulting from:
- Increased litigation and third-party litigation funding
- Broadened definitions of liability
- A greater percentage of plaintiff-friendly legal decisions
- Larger compensatory court awards – some so costly that they’re referred to as “nuclear verdicts.”
In such a litigious climate, the threat of a lawsuit can be intimidating. But knowing you have protection in the event of a suit is liberating, and personal umbrella insurance provides that kind of protection. A knowledgeable insurance agent or broker can work with you to determine what assets a litigant would be likely to seek in a suit and what policy limits you would need to protect those assets.
Liberate yourself. You’ve worked hard. Enjoy the life you’ve earned. A personal umbrella will have you and your family covered.
About the Author
Director of Personal Risk Management
GCG, an Alera Group Company