If you are professionally successful, financially comfortable, own a nice home in an “upscale” zip code, there’s a growing threat you could become the target of a high-stakes lawsuit … simply because of your status.
That’s the conclusion of a recent national survey sponsored by ACE Private Risk Services among people with a net worth of at least $5 million.
As millions of people remain unemployed or stagger under heavy debt, and as the general public has been programmed in recent years to question the manner in which “wealth” has been acquired, a new emotional intensity for raising taxes on “the rich” has become increasingly inflammatory.
The result? A time-tested method of wealth transfer is now front-and-center. Specifically, the possibility of lawsuits against high-net-worth individuals. Yet despite this danger, the ACE survey found that “people of means frequently fail to realize that many aspects of their lifestyle can lead to a costly liability lawsuit.” Which aspects?
– Employing household staff, such as a nanny, housekeeper, gardener, or driver;
– Serving as a director or officer on the board of a charitable organization;
– Hosting large parties or “fund-raisers” on their property;
– Having a swimming pool or trampoline on the premises.
The survey also noted that people “underestimate the risks posed by dog bites, libel, slander, or character defamation resulting from participation in social media platforms or e-mail. If you’re a well-known person, and you say something unflattering about someone else, you not only risk a defamation lawsuit, you risk your career.”
Cause for concern
Although the survey revealed “concern” among wealthy people about the threat of liability lawsuits, most respondents underestimate the degree of risk and the potential financial consequences.
Yet if they are sued, and their coverage falls short of the award to the plaintiff, the court can order the liquidation of assets, starting with savings and investments followed by vacation homes, rental property, even the primary home.
Court data shows that “substantial sum” awards are common. For example, as shared in the report:
– $49 million was awarded in California to the family of a 21-year-old college student whose injuries in an auto accident will require 24-hour care for the rest of his life;
– $11.3 million was awarded in Florida to a woman who accused the defendant of posting defamatory statements on an internet bulletin board;
– $2.3 million was awarded in Pennsylvania to the family of an 11-year-old boy who was kicked in the face by a privately owned horse.
Minimal coverage level?
Many legal experts suggest that high-net-worth families carry a minimum of $5 million in coverage. A typical annual premium for a $5 million umbrella policy is only $608 annually, and less than $1,000 for $10 million in coverage.
To avoid catastrophic losses, high-net-worth individuals should seek a customized analysis, along with recommendations for liability coverage, from carriers that specialize in meeting these unique needs.
Contact me today to continue the conversation.