Mechelsen, Inc. Risk Management Forum

Red Flag: Trusts and Limited Liability Corps

Red Flag:  Trusts and Limited Liability Corporations

You may be involved in helping clients transfer assets into a Trust or LLC.  If so, be sure that the insurance policies designed to cover the value of the asset and the liability exposure derived from the use of the asset is changed to account for the transfer of ownership.  If the Trust is not properly included on the policy there is a chance that the Trust a) may not be paid properly for the value of the property if destroyed/damaged, and b) may not earn defense and indemnity protection if it is named in a lawsuit. 

Hypothetical example:  Assume that your clients transfer their vacation home into their Trust.  Now let's suppose that while visiting your client's home someone suffers a serious injury due to some alleged negligence in how your client's kept their home free of danger.  When the injured person's lawyer looks for all possible defendants, don't you think it'll be easy for them to find out that the home is owned by the Trust?  Will your client's insurance policy provide both defense and indemnity coverage to the Trust in the management of the lawsuit?  Are you sure?

Before something like this happens, talk to your insurance specialist and involve them in properly altering the insurance portfolio to reflect the position of the Trust or LLC.  99% of the time the premium change should be $0!

Mechelsen, Inc.               Darren McGraw, MBA, CIC            mechelseninc.com

Claim Horror Story: Recent verdicts/settlements

Claim Horror Stories:  Recent jury verdicts and settlements

King County - Improper Lane Change:  Defendant changed lanes into plaintiff on I-90 causing a three-car accident.  Injured Plaintiff suffered a strained neck and underwent chiropractic care.  Plaintiff was awarded $487,550 on 11/9/06. Defendant had only a $25,000 limit of liability on her auto policy.

King County - Intersection Accident:  Defendant attempted to turn left onto Sahalee Way in Sammamish and pulled in front of Plaintiff's vehicle.  Plaintiff suffered a fracture of her T5-T6 (back), a closed head injury, and secondary Staph infection while hospitalized.  Plaintiff can no longer work as a transplant nurse.  Settlement on 12/4/06 for $5,000,000.

King County - Failure to Yield:  Defendant made a left turn in front of Plaintiff who was travelling in the opposite direction on Guide Meridian Road.  Plaintiff suffered a broken tibia/fibula, broken rib, broken wrist, and fractured C-1, and closed head injury.  Defendant had $1,000,000 Liability limit and Plaintiff had $50,000 Uninsured Motorist limit.  Medical expenses totaled $286,394 and lost wages totaled $116,531.  Demand of Plaintiff into trial of $4,169,631.

Pierce County - Intersection Collision:  Defendant tried to cross intersection and struck Plaintiff on his motorcycle.  Plaintiff fractured his foot, his tibia, his fibula and suffered several cuts and bruises.  Settlement on 10/24/06 for $1,000,000.  Insurance contribution amounts unknown.

Pierce County - Snowboard Accident:  Defendant ran into Plaintiff while snowboarding at Crystal Mountain.  Plaintiff suffered a broken leg and a knee injury requiring surgery.  Settlement on 11/21/06 for $137,500.

Yakima County - Head-on Collision:  Defendant crossed centerline on SR 12 and struck Plaintiff.  Plaintiff broke her ribia, fibula, kneecap, ankle, wrist, ribs, and three teeth.  Defendant had only a $25,000 Liability limit and Plaintiff had only a $25,000 Uninsured Motorist limit.  Medical bills totaled $325,293.  Negotiated settlement of $785,000 will be pursued against assets of Defendant.