It can take a lifetime – or multiple lifetimes – to create a family estate of significant value. However, many people enjoy at least a modest net worth based on the appreciating value of their home and other assets. It is important for everyone to realize, whether modestly or very wealthy, the exposure you may have if you are the defendant in a personal liability lawsuit.
Understanding The Exposure
The state of Texas has a well-developed set of statutes and case law that allows individuals and companies to bring civil lawsuits to recover damages. These laws specify the types of situations where a lawsuit is permissible, and they address the potential types of monetary recovery that are allowed. For example, a defendant may be sued due to negligence in causing an auto accident, and if found guilty, subject to paying multiple types of damages.
The types of damages normally pursued in a personal injury case often include:
- Economic damages. These are the actual, proven costs incurred by a defendant. They may include property damages, medical bills, lost income, and other costs and expenses.
- Non-economic damages. You’ll hear discussions of these type of damages as pain and suffering, loss of enjoyment of life, mental duress, and other subjective costs and imputed expenses.
- Punitive or Exemplary damages. Courts have developed the use of these awards to punish intentional wrong-doing and/or to deter future bad acts and conduct by others. These awards are often directly related to the wealth and assets of the defendant.
Texas has a somewhat complicated approach to limiting potential awards under its exemplary punishment provisions. These include the requirement that the damages be awarded by a unanimous jury and a cap of a multiple of other damages. This takes some of the role of net worth away from any awards. However, the damages may still far exceed any individual’s actual net worth.
There is also a somewhat nefarious aspect to civil litigation. It is a clearly understood reality that individuals and companies with a significant net worth are more likely to be targeted by litigants than others. This is based on the simple economic reality that litigation is expensive, and the probability/possibility of a significant award is both a prerequisite and incentive for filing a lawsuit in most cases.
Why Planning Is Vital For Protection
While insurance may cover some payments for damages in a civil case, those who are suing may go after your personal financial assets. While there are caps to total payments for damages in Texas for medical malpractice, other claims for personal injury are not capped. Therefore, the greater your net worth, the greater your exposure to such awards for damages.
There are a number of steps that can protect you from the catastrophic consequences of a large civil judgment. First, of course, is having adequate insurance. The single biggest benefit of having the right insurance coverage is often the provision of a legal team to defend you. Your insurance carrier will pay for lawyers to defend you in cases where you are properly covered.
Secondly, and especially if you are a business owner, you can separate your affairs by a number of practical legal steps. These precautions include forming and maintaining a corporation or LLC, placing assets in trusts or other legal vehicles, and other planning steps.
The professionals at Stockard, Johnston, Brown, Netardus & Doyle, P.C. in Amarillo understand these procedures and precautions. They have extensive insights into how to protect your net worth, and will tailor a plan to your specific needs. Call today for an initial consultation.