Minimize Risk to Cover Your Assets
(County Bar Update, August 2005, Vol. 25, No. 7)

Minimize Risk to Cover Your Assets

As an attorney, you are likely viewed by the community as someone who has deep pockets. While you may protect your finances with an umbrella liability policy, you would rather not use it. Taking some extra precautions and becoming familiar with common risks can help prevent needing to put an umbrella policy into action.

If you do not already have an umbrella insurance policy, seriously consider getting one. The cost of a policy is minimal, and it can protect your financial security. If your regular auto or home insurance policy limits become depleted by a large claim, your umbrella policy will pay additional costs. Liability limits are available for up to several million dollars.

One benefit of personal umbrella insurance, often overlooked, is how comprehensive the coverage is. Often, umbrella policies are broader than underlying policies. For example, personal injury such as libel and slander may not be covered by your homeowner policy, but an umbrella steps in and provides coverage less the deductible.

When shopping for an umbrella insurance policy, remember that most insurance companies require you to carry all your underlying policies with them. If you do not want to move your other policies, shop around for a company that offers a stand-alone policy.

A good rule of thumb in the financial industry is to have $1,000,000 of liability protection for every $300,000 of your net worth. Having an umbrella liability policy is an inexpensive alternative to raising the limits of all your basic underlying policies, plus the limits available are typically much higher than you can purchase on your basic policies.

How can you minimize your risk?

Pets. Dog bites are the most common of the umbrella liability insurance claims that occur in the home. If you have pets with questionable temperaments, keep them well away from all people who visit your home. When you are selecting a family dog, do some research to find out which breeds have the least potential for biting. A leading umbrella insurance company, RLI, recently settled a claim for $312,467 because an insured’s dog bit a painter who was working in the insured’s home.

Pools. After dogs, the second biggest homeowner exposure to liability is a pool, and the potential problems concern children. Pools are an attractive nuisance and create increased liability for the owner, even when there is adequate fencing. Since owners cannot watch the pool at all times, install a lock on the entry gate. Another good safety measure to consider is a pool sensor that triggers an alarm inside the home when someone or something falls into the water.

Entertaining. Whenever you have guests over to your house, boat, or rental property, you are liable for their personal safety. Always caution guests to step carefully around wet areas or watch their step on the stairs, particularly if you have a pool. Avoid leaving items lying around that could cause anybody to trip and fall.

When hosting a party, whether for teenagers or adults, allowing guests to become intoxicated in your home and then operate a vehicle is a common liability risk. Never let underage guests consume alcohol. Be aware of the condition of your adult guests, and encourage the use of a designated driver.

Knowing where your kids are, what activities they have planned, and whether adults will be present can save lives and prevent injuries. An RLI umbrella claim was settled recently for an accident occurring at a cabin rented by a teenager, without adults present, where a boy fell from a balcony. The injured boy became quadriplegic, and the settlement totaled $542,656.

Driving. If you regularly speed, bend the rules, drive aggressively, or yell at other drivers, your children will acquire these habits as well. You may have the driving experience to avoid accidents, but teenagers often do not, and when they duplicate your actions, their risk for being in an accident increases dramatically. Your kids learn the majority of their driving habits from you. Make sure they are learning the right ones.

According to the National Highway Traffic Safety Administration, motor vehicle crashes are the leading cause of death for people ages 15-20. Males were in the driver’s seat 66 percent of the time during these accidents.

Car safety features. When you are determining which car to buy for yourself or which car your young driver will use, choose one with updated safety equipment. Front and side airbags can save your child and your child’s passengers’ lives if they are involved in a serious accident. If your teenagers are buying their own cars, impress on them the importance of safety features. And, of course, stress the value of seat belts, and always wear yours to set the example.

Drinking and driving. We all know that we should not drink and drive, and likely your children know it, too, but it is important that they hear it repeatedly from you. In 2003, 31 percent of drivers ages 15-20 that were killed in motor vehicle accidents had been drinking (National Highway Traffic Safety Administration). Talk to your kids about the danger to themselves and others.

Recreation activities. If your family goes hunting, or your children use BB or pellet guns for recreational purposes, impress on them the importance of safety. Accidents are caused by inexperienced users injuring others. Only allow use of a BB or pellet gun when an adult is present, particularly if your children’s friends are visiting. A recent RLI umbrella claim was settled for $530,000 when an insured’s son accidentally shot a friend with a BB gun, causing a serious eye injury.

Accidents happen. Sometimes, they have the power to change your life. The last thing you want in such a situation is to worry about paying for damages that have spiraled beyond the liability limits of your home or automobile insurance. An umbrella liability insurance policy can protect you financially when your other insurance policies are exhausted. You work hard to gain the assets you and your family enjoy. You do not want to see them threatened by an accident and lawsuit. Because accidents are unpredictable and can be financially devastating, consider umbrella liability coverage when you review your insurance portfolio. It is another tool to help you to safeguard your financial future.

Umbrella Insurance Claims
Data provided by RLI Corporation
All other auto accidents (37%)
Other non-auto related accidents (19%)
Youthful driver auto accidents (17%)
Aged driver (70+) auto accidents (12%)
Personal injury (libel/slander) (9%)
Slip/trip/fall accidents (3%)
Watercraft incidences (3%)

This article is intended to inform the reader of potential liability exposures for attorneys. This article reflects general principles only and does not render legal advice. Readers should consult legal, financial, insurance, and other advisors if they have specific concerns. Neither the Los Angeles County Bar Association nor Aon and its affiliates assumes any responsibility for how the information in this article is applied in practice or for the accuracy and completeness of the information. Reproduction without written permission is prohibited. This article is made available by Aon Recreation Insurance to Aon Direct Insurance Administrators, administrators of the LACBA Sponsored Aon Insurance Solutions Program for LACBA Members. www.aonsolutions.com 

Aon Recreation Insurance has been a leading provider of recreation insurance since 1966. It also offers an affordable stand-alone umbrella insurance policy that extends beyond homeowners, auto, or recreation vehicle insurance policies. Aon is a sponsored provider of the LACBA. For a quote or more information, call (866) 446-6291 or visit www.aonrecreation.com/umbrella.

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