My wife had a minor traffic accident 2 years ago. No body was apparently hurt. No ambulance was called, etc. It was determined to be my wife...

Question

My wife had a minor traffic accident 2 years ago. No body was apparently hurt. No ambulance was called, etc. It was determined to be my wife's fault. Our insurance company paid for the repairs of both cars. Now the other party has sued us for over $1M. Our car insurance limit is $100K. We own a principal residence, a rental house (equity $30K) and some stocks ($50K) as well as 401K. I am presently out of job

Do we need to worry about the situation? Is it worth liquidating our assets such as selling the house and stocks or transferring to our kids or relative, or filling bankruptcy?

Presently our insurance company is handling the case. Do we need to hire an attorney or let the insurance company deal with it

Answer

You had better worry about it. Contact an attorney in your area, or ask your insurance company to refer you to an attorney at their expense.

Answer

Don't get freaked out by Mr. Marman. It seems to me his answer is always either "hire a lawyer," or "hire me." First off, your insurance company is required to hire you an attorney. Many larger insurance companies actually have staff attorneys who do nothing but represent insureds. They should have already provided you an attorney since you say they are handling the case.

If you have not been contacted by an attorney to represent you within a week to ten days of submitting the lawsuit to the insurance company, OR at least a week before the answer is due, call me or another attorney immediately so we can help you demand immediate representation from the insurance company.

Second, a $1M case filed two years after the fact is highly suspect and pretty unlikely to have much merit, at least at that value.

Third, your insurance company is obligated to settle the case for policy limits or less if at all possible. If, at any time, they come to believe the facts and law are likely to support a judgment outside of policy limits, they are obligated to notify you and then pay the policy limits. You would then be on your own, but unless and until that happens, there is no reason to hit the panic button. You should, however, keep on the attorney they hire for you to make sure he or she is doing a running analysis of the case value so you don't get surprised by them suddenly paying policy limits and telling you you need to find your own attorney.

Lastly, even if you were not insured at all, there is no reason to go liquidating assets and certainly do NOT transfer assets to kids or relatives. Liquidating assets will just make them more easily accessable in case a judgment is entered against you, and will lose you many exemptions from judgment collections, most notably the automatic homestead exemption on your personal residence. And don't get suckered by anyone who tells you you must record a homestead declaration, the homestead exemption is automatic. The declaration only designates which property you consider your homestead. Unless there's some doubt as to which is your home, between the rental and your house, it is a pointless exercis).

As for transferring assets away, that is simply illegal when it is for the purpose of trying to put them out of reach of a judgment or other creditor. If you file for bankruptcy, the bankruptcy trustee will go seize those assets and bring them back into your bankruptcy estate as voidable preferences. And if you don't file for bankruptcy, they will be illegal under state fraudulent conveyance laws, subjecting you and the recipients to attorneys fees on top of having to undo the transfers.

So the thing to do is sit tight, work with your insurance company and the lawyer they give you. Keep on them to actively defend your case. Then if, and only if, it looks like the plaintiff really could recover more than the policy limits if the case goes to trial, and they refuse to settle for policy limits, you should talk to a bankruptcy attorney.

Answer

I have dealt with these issues before. Even though you and the insurance company is supposed to have the same interest, defeating the lawsuit paying as little as possible, that is not always the case. This is because, if the insurance company offers to settle for $90,000, and the plaintiff says "no", the insurance company has only $10,000 to lose by going to trial if $100k is their maximum payout even if Plaintiff wins a million dollar judgement. If that would happen, the insurance company may be on the hook for 100k, and you may be on the hook for the rest. "Cumis counsel" is an attorney hired by the insurance company to protect your interests in the case of such a conflict of interest. Who determined it to be your wife's fault? Not a court? Sounds like it may have been a police officer who may not have known all the facts, or an insurance company, many of which do not bother to investigate properly. When the insurance company paid for the car repairs, they should have obtained a release from the other party in exchange for the payment, like a settlement. This should be binding on the other party, but I would need to look at it. I would also like to know the facts to make sure you are being properly represented. The other issues we can discuss. I suspect there may be other weaknesses to their case, as well.

Best,

Daniel Bakondi, Esq.

[email protected]/* */

415-450-0424

The Law Office of Daniel Bakondi, APLC

870 Market Street, Suite 1161

San Francisco CA 94102

http://www.danielbakondi.com

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