Protecting Yourself from Common Liability Risks
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An unwelcome consequence of prosperity is that high-net-worth individuals become more vulnerable to the threat of personal liability suits, whether legitimate or not – especially in today’s litigious world. Each year brings a new peak in both the number of cases and the total amount paid out through a settlement or judgment.
Here are today’s most common liability risks and our advice on how to safeguard against them.
1. Risk: Visibility
A magazine feature about your home, social media posts, board service or a garage full of luxury cars — all can attract unwanted attention, even if you aren’t a celebrity.
What you can do
Limit social media posts highlighting your jewelry, luxury vacations, home furnishings, or other obvious signifiers of a high-end lifestyle. Before speaking in public, consider having your remarks reviewed by a professional to ensure that nothing you say could be construed as slanderous.
2. Risk: Minors and Young Adults
As long as minors and young adults permanently reside at your address, you are responsible for their actions. The threat they pose to your liability increases as they get older, such as when they obtain their driver’s license or go to college, where incidents like hazing may occur. Additionally, their social media activity can lead to issues like cyberbullying or unwanted attention to your family’s lifestyle.
What you can do
As a rule, children are often unaware of liability issues, so it’s crucial to keep them fully informed, especially teenagers who are more likely to engage in risky behavior. Consider enrolling them in a defensive driving course and educating them on the significance of safe driving habits. As much as you can, limit or monitor their social media usage, and never allow alcohol or drugs at gatherings you host.
3. Risk: Entertaining
Inviting a large group into your home can be a wonderful experience, but it also comes with elevated liability exposure. Serving alcohol can have serious repercussions should a guest be hurt in a drinking-and-driving or pool accident.
What you can do
If the pool will be open to guests, it is wise to hire a lifeguard, especially if children are present. Ensure that any outside vendors you hire are covered by their own workers’ compensation and general liability policies. Additionally, consult your broker about situation-specific liability protection. If you frequently host parties, confer with your wealth manager and attorney about transferring your property to a trust or LLC to create legal separation in the event of a lawsuit.
4. Risk: Renovations and repairs
Any work being conducted on your property, whether it’s daily maintenance or new construction, exposes you to liability in the event of a worker being injured on the job.
What you can do
When hiring contractors, prioritize those with solid reputations. Limit the number of subcontractors involved and make sure everyone provides proof of workers’ compensation and general liability insurance.
5. Risk: Driving
The potential trouble caused by automobile accidents has increased over the last several years. Texting, talking on the phone or looking at a vehicle’s screen is just as perilous as driving under the influence.
What you can do
Recognize the seriousness of taking eyes off the road, whether you’re getting directions or regulating the air conditioning. Use technological assists, such as Do Not Disturb, to help avoid the temptation of texting. And, of course, never drive while impaired.
Proper Coverage
Accidents happen, and with successful individuals increasingly becoming targets of costly lawsuits, it’s important to not only have personal liability insurance but the correct amount. Personal liability insurance is commonly included in policies like homeowners, automobile, and watercraft. It shields you from losses resulting from negligent acts that cause injury, property damage, or reputational harm, except in the event of criminality or malicious intent. However, the amount of coverage provided by these is often limited, therefore, we often recommend purchasing personal excess liability coverage which provides an additional layer of protection.
Determining the proper amount of coverage requires a thoughtful conversation with your broker but you can start by taking our Liability Assessment Tool, which helps suggest a range of liability based on your lifestyle.
The unfortunate truth is that personal liability risk is everywhere, and while it cannot be entirely prevented, paying extra attention to the scenarios that result in most claims will prove to be beneficial.