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| Best Practices: Law |
Predator Repellent
Kassandra Kania
02/01/2007
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Adrienne "Andy" Kotner
did not see the lawsuit
coming, and when she finally did, it was too late. The claimant, a delivery
truck driver, befriended Kotner during his frequent delivery of baby gifts when
she was pregnant with her first child. At the time, Kotner was married to a
high-profile physician in San Diego, and the packages would often be addressed
to Dr. and Mrs. or bear the initials M.D. "He [the deliveryman] loved my tiny
lapdog," Kotner says, "and he would play with it while he chatted with me."
After the birth of her son, Kotner’s dog became jealous and
began nipping at people, so she kept it inside. One day she forgot to lock her
screen door, and the deliveryman came inside. "The dog was yapping, and I had my
son in my arms," she recalls. She asked the Deliveryman to leave the package
outside for her husband to retrieve, but he insisted on placing it inside. Then
he reached for the dog. Kotner warned him not to, but he ignored her, and the
dog nipped him. "It didn’t break the skin or draw blood," she says, "but I just
knew in that instant that M.D. stood for ‘more dough.’"
TOP VIEW
In today’s litigious society, legal predators increasingly target the affluent. Although no strategy offers complete
protection against such attacks, individuals can take steps to either discourage
such lawsuits or to prevail should one occur. Insurance policies, along with
legal shelters such as LLCs and asset protection trusts, offer some defense. The
most important insurance, however, is to act before a lawsuit predator
strikes. |
The following week, the delivery company sued Kotner, alleging
that her dog had terrorized the deliveryman and caused serious bodily harm.
Fortunately, Kotner’s homeowners insurance settled the claim, but not without
raising her premiums and leaving a bad taste in her mouth. "That one lie cost me
a lot of money," she says. "Lawsuit abuse is not just a one-time settlement. It
has long-lasting effects."
Like Kotner, affluent people—or even those who simply appear to
have money—often find themselves the target of opportunists hoping for a quick
settlement. "There’s no question that wealthy people are more subject to
lawsuits than less well-known or less wealthy people because they have deep
pockets and are often averse to publicity," says Herbert Nass, an attorney in
New York who specializes in trusts and estates. To avoid exposure, including
financial disclosure, the affluent are more likely to opt for so-called nuisance
settlements. This might seem like a quick, easy fix, but it only serves to
encourage lawsuit abuse, say lawyers.
When faced with a frivolous lawsuit, William Gwire, an attorney
in San Francisco specializing in legal malpractice, advises defendants to make
it clear that they are not going to settle. "Putting up a good defense from the
start is important," he says. "If the [plaintiff’s] lawyer knows he’ll have to
do a lot of work on a case that doesn’t have merit, he’s going to fold."
Unfortunately, most predatory lawsuits are unpredictable. And
while there might not be anything people can do to prevent being sued, there are
steps they should take to minimize their risk and protect their assets.
The first line of defense is good insurance. Whereas the
majority of people have homeowners and vehicle insurance policies, umbrella
liability insurance can provide coverage above and beyond these primary policies
in the event of a claim. As Jim Kane, president of Hub International Personal
Insurance in Chicago, points out, ownership of property is going to generate a
liability exposure, and homeowners need to be ready. "I think people choose
not to prepare," Kane says. "Most clients invest more research in buying a
refrigerator than in buying insurance." How much coverage to purchase depends,
in part, on a household’s risk tolerance, he says. Clients need to constantly
work with their insurance agent to update their policies.
Business owners or those serving on nonprofit boards should
also consider purchasing errors and omissions (E&O) insurance or directors
and officers (D&O) insurance. E&O insurance indemnifies the insured for
any loss sustained because of an error or oversight on his or her part. D&O
insurance provides financial protection for directors and officers should they
be sued in connection with the performance of their duties as they relate to the
company.
Individuals asked to take a position on a nonprofit board
should determine whether or not the organization provides adequate insurance
before they accept the seat. "Your risk manager should look at the bylaws and
certificate of insurance for that board to make sure you’re indemnified," Kane
points out. "Most nonprofit boards don’t have the money to buy proper
protection. You have to decide if you want to take the risk, insist on them
buying it or buy it yourself."
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