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WPG
Articles : Asset Protection |
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How Being At Fault While Not Financially Responsible Works |
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By Ray Chodos, November 2004 |
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 While
sitting at a traffic light waiting for the green light, you are slammed
from the rear by a drunk driver who never saw you and didn't even attempt
to stop. Clearly, you are an innocent victim with no fault in the
accident. Unfortunately, you are severely injured, suffering several
broken bones and an operable lower back injury. Medical bills total
$150,000. Because you couldn’t work for over a year, lost wages climb to
$50,000. You seek to be compensated by the party at fault (the drunk
driver). After investigation, it is determined that the at-fault driver
has only $50,000 in liability insurance. Sadly, further investigation
reveals that the at-fault driver has no assets and earns only a modest
salary.
You can demand that the at-fault party pay the $200,000 for medical
expenses and lost wages. Chances are excellent though that the drunk
driver will not willingly pay. A lawsuit is filed and three years later a
jury returns a verdict for $350,000 plus $100,000 for punitive damages in
favor of the plaintiff. The system worked, right? This is known as a
"hollow" verdict. It is hollow because the insurance company is only
responsible for $50,000 of the verdict. Under the law, the balance of the
verdict is the at-fault party's responsibility. However, recall that the
at-fault party in our example has no assets. As for the punitive damage
portion of the award, most insurance polices specifically exclude
punitive damages, and certainly, the drunk driver has no means to pay it.
In the reality such a suit would likely not have been filed since the end
result is predictable and litigators as well as plaintiffs are interested
in financial compensation.
In many situations affluent families can utilize legal entities to
achieve unattractiveness to litigation claims that can destroy family
financial security. |
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Ray Chodos and Adam Chodos, Esq., CPA are members of
the Wealth Preservation Group LLC, a Greenwich, Connecticut based planning
organization specializing in wealth preservation, business succession,
executive benefits, interacting with the legal and accounting communities.
Find more information at www.WealthPreserve.com. |
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Impact of Litigation on Small Business |
 Most
companies used business assets to pay the damages. However,
in the case of employee complaints, insurance covered some
of the damages. Owners mentioned that the payment of
damages nearly put them out of business, which affected them
for a long period of time as they worked to rebuild the
business and recoup their losses. |
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While sitting at a traffic light
waiting for the green light, you are slammed from the rear by a
drunk driver who never saw you and didn't even attempt to stop.
Clearly, you are an innocent victim with no fault in the accident.
