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C H E C K O U TFORACHANCETO
AN IPAD MINIWINOUR WEB DEMO
Parr Insurance Brokerage 2157 N Damen Ave Ste 2B
Chicago IL 60647
P: 773.489.3001 F: 773.489.5908
JUNE JOHNSONACCOUNT MANAGER
PARR
INSU
RAN
CE BRO
KERAG
E
Booklet for tradeshow and mail distribution
How does one’s fi nancial success become a costly liability – literally?
It happens when a high net worth individual or family becomes the target of a successful multi-million-dollar liability lawsuit and the damages awarded far exceed the coverage provided by insurance. And it happens with greater frequency than one would expect.
Unfortunately, a number of wealthy individuals do not devote enough attention or time to best protect their fi nancial assets and future earnings. They tend to underestimate the multitude of risk factors their lifestyles present and the high levels of liability damages often awarded. The affl uent need to understand that if an accident or other incident occurs, an excess liability policy is essential to cover costs that could go well beyond the coverage provided by their existing insurance policies. This article explores these issues and outlines how to address them.
Understanding Liability Risk FactorsSituations such as an automobile accident, or a worker or guest injured at one’s home, are easily recognized as events that pose liability risks and concerns. Yet, even these typical types of incidents present greater dangers, and occur in larger numbers, than imagined. And, at times, this is due to one’s wealth.
The reasons for the latter are two-fold. First, high net worth individuals and their families often have active lifestyles and busy schedules that can increase their exposure. Secondly, just the fact that they have major assets can prompt lawsuits that seek signifi cant damages.
For example, when analyzing one’s exposure to risk due to a car mishap, the number of teenage car drivers at home is a critical factor to address. Another issue to cover is whether long commutes to work occur on a daily basis. Obvious scenarios, true.
About the AuthorMelissa Neis is Vice President of Chicago-based Parr Insurance Brokerage, an independent insurance agency founded to protect high-net-worth individuals and families. After working several years in the arts, she joined the Parr team in 2005 to apply her knowledge of art to the insurance world. Melissa graduated from Illinois Wesleyan University with a BFA in painting and a minor in art history and earned her MBA from University of Notre Dame in 2013.
Inadequate Liability Insurance May Prove Costly For Wealthy Families
PH: 773.489.3001 FX: 773.489.5908 www.parrinsurancebrokerage.com
Risk Factors, Level of Damages Often UnderestimatedBy Melissa Neis, Parr Insurance Brokerage
However, what if an accident involves colliding with a mini-bus carrying 15 or 20 people? One may be liable for damages awarded to all of the injured passengers, particularly if resources exist to cover such expenses.
For the wealthy, owning more than one home is the rule rather than the exception. Multiple homes and homes with swimming pools certainly increase liability risks.
A less obvious risk factor that involves personal residences, yet frequently evident, is the employment of domestic employees such as a cook, driver or housekeeper. In addition to sustaining an injury while on the job, one needs to be protected against potential lawsuits that relate to discrimination, sexual harassment, wrongful termination and other issues. These workers may know more than most about the fi nancial wherewithal of their employers, and if they are disgruntled or feel maligned, see a lawsuit as one way to gain signifi cant compensation. Adequate insurance is a must for such scenarios.
Among other situations that may impact one’s liability are:
Ownership of watercraft. Yes, insurance policies for such vehicles will cover a number of claims, but may not provide enough coverage in a liability situation.
Nonprofi t board positions. Many wealthy individuals volunteer to serve on boards of directors for not-for-profi t organizations. But if these groups do not provide adequate liability insurance for directors and offi cers, or none at all, board members could be at great risk if the organization is sued.
Social media accounts. Those who blog, tweet or post comments on social media platforms are at risk if such remarks are viewed by an individual as slander, libel or character defamation. Yes, the Internet poses a risk factor never imagined two decades ago.
Recognizing the Risk LevelsAnother major issue not understood is the amount of damages awarded in liability lawsuits. According to a 2012 survey conducted by the ACE Group of high-net worth households, more than half – 51 percent – remarkably believe the highest amount of damages they could be held liable for if someone sustained serious injury as a result of an accident involving their vehicle or on their property is
less than $5 million.
Without question, a reality check is needed here. A review of media coverage across the nation will reveal verdicts and settlements in such cases are in the multi-millions, particularly if plaintiffs have permanent disabilities as a result of the incident. Even events that appear minor at the outset can generate major awards. Here’s one case in point:
The insured client, a member at an elite health club, had a disagreement with another club member about rules concerning the running track. The dispute escalated to a shoving match, and the other club member, who was a surgeon, fell, breaking his wrist. The injury prevented the surgeon from operating for the remainder of his career with an annual loss of income of more than $500,000 annually. The overall claim value was $13 million in lost wages, not even calculating medical costs, punitive damages, and pain and suffering.
Then, there is the straightforward fact that one’s wealth status alone serves as a catalyst for liability lawsuits that seek huge amounts of dollars. Plaintiffs and their attorneys aware of the high assets owned by the defendant likely will seek larger payouts than if the defendant is not affl uent.
There also are common law joint and several liability statutes on the state level than can exacerbate the situation. If several parties are found liable, the statutes allow the plaintiff, if desired, to collect the entire judgment from just one defendant. In such instances, attorneys may target the one defendant with the greatest wealth. These are the dynamics one can expect in this litigation-driven era. Interest in Insurance Issues Lacking
It’s no surprise that allocating funds for insurance is not as compelling to people as making and monitoring investments in the stock market, real estate or other more intriguing, income-generating vehicles. Wealthy individuals, understandably, devote much greater attention to increasing or, at the very least, maintaining their signifi cant assets. Protecting them via this mundane mechanism called insurance can be quite low on their radar.
However, this mindset provides yet one more reason why so many fail to obtain suffi cient liability coverage and do not factor in the worst-case scenarios. Many affl uent individuals
are comfortable with the typical $1 million or $2 million umbrella policy sold by the carrier who provides their other policies. There also may be a belief that more coverage will require substantial increases in premiums, a cost they can skirt with minimal impact. Such assumptions are both inaccurate and possibly dangerous to one’s fi nancial well-being.
Another risky area involves the adult children of the affl uent. Here, too, disinterest or lack of understanding of the impact liability settlements can have on their holdings or inheritances may result in signifi cant fi nancial losses.
How Much Is Enough? How much excess liability coverage should one purchase? Of course, there is no absolute answer to the question. Coverage typically can range from as little as $1 million to more than $50 million in the United States, and additional coverage may be secured by purchasing multiple excess liability policies.
But one should not begin with a specifi c number in mind. Thinking strategically is the key. One should:
• Detail and analyze all or the risk factors
• Avoid being conservative when identifying those risk factors, determining a coverage amount and budgeting for premiums
• Think of worse-case scenarios to help ensure protection will be adequate
• Consider all of the assets that could be impacted if coverage is lacking, such as retirement plans, trusts, real estate holdings and even one’s income possibly being garnished
• Factor in existing policies and current liability coverage to ensure the excess liability policy ideally complements current coverage, and there are no loopholes or gaps in coverage
One’s specifi c profi le will dictate the coverage required and, in turn, premium costs. To provide some frame of reference, here are three estimated annual premiums for a client who owns two homes and two automobiles:
Coverage limit of $10 million: estimated annual premium of $1,400
Coverage limit of $20 million: estimated annual premium of $6,500
Coverage limit of $50 million: estimated annual premium of $24,000
Considering what could be at stake, such premiums are less expensive than most people anticipate. Insurance fi rms that focus on high net worth individuals have designed programs specifi cally for the inherent risks associated with this lifestyle. Therefore, the premiums for such policies are relatively inconsequential in comparison to the potential liability.
www.parrinsurancebrokerage.com
2157 N. DAMEN AVE.SUITE 2BCHICAGO IL, 60647
How to Take ActionHigh net worth individuals often rely on trusted, knowledgeable advisors when major fi nancial decisions must be made, and liability protection warrants expert counsel as well. One approach is to enlist an independent insurance agency or broker that focuses on affl uent clients. These fi rms, unlike agencies that represent a bevy of insurance products and a variety of clientele, provide the in-depth expertise the wealthy expect and demand. Alternatively, some fi nancial advisors may bring this knowledge to the table, or liaison with these insurance agency specialists, and can offer expert guidance.
An experienced, knowledgeable insurance specialist or fi nancial counselor will understand the many nuances in available policies and coverage. For example, it may surprise many that no more than a handful of insurance carriers offer products specifi c to this market segment, and likely should be the source for the best plan of protection. These experts can work together to create a long term plan that addresses the various risk factors, incorporates existing policies and ensures minimal risk is achieved.
High net worth families should – and must – recognize they have the most to lose in a countless number of liability situations. But they do have the resources, both in terms of knowledgeable counselors and fi nances, to protect those hard-earned assets.
About ParrChicago-based Parr Insurance Brokerage is an independent insurance agency founded to protect high-net-worth individuals and families nationwide with customized insurance coverage for fi ne homes and possessions. Through national and global carriers, Parr Insurance provides coverage for high-value homes, automobiles, valuable articles, and collections. For more information on Parr Insurance Brokerage services, contact an agent today.
P: 773.489.3001 F: 773.489.5908 E: [email protected] www.parrinsurancebrokerage.com
Booklet for tradeshow and mail distribution
An intriguing irony exists today in many standard apartment leases. There are rules
that cover a number of essential areas ranging from payment terms and security
deposits to pets, smoking restrictions, workout facilities and more. The regulations are
designed to protect landlords from fi nancial liabilities and the property from damage,
improper egress or other dangers.
But, far too many agreements fail to include a requirement that can protect landlords
from even more signifi cant costs. The missing clause? Stipulating that the prospective
tenant has renter’s insurance before legally occupying the residence.
Consequences May Be Devastating
Based on our experience, the benefi ts for landlords to require renters insurance have
remained off their radar screens. Over the past few years, we’ve witnessed a growing
awareness of its value, but not necessarily a groundswell of action.
This is rather startling as the pitfalls from this inaction can be devastating for a
landlord. No matter how many safety and security measures are put in place,
accidents can still happen any time. When tenants are uninsured, responsibility for
recovery can be unfairly placed on the landlord. Here are some examples from our
experience:
A Chicago-area renter asked a neighbor to help move some furniture. While lifting a
heavy mattress, the neighbor fell and broke his knee, requiring surgery. He didn’t have
health insurance and fi led a claim against the tenant to pay the substantial medical
bills. Unfortunately, the tenant didn’t have renters insurance and barely had any funds
to pay the costs. The injured party proceeded to fi le a claim against the landlord. The
landlord’s insurance policy paid, but when the claim added to his existing loss history,
his premium rates skyrocketed.
A 24-unit apartment building in the Los Angeles area sustained a major fi re resulting
in substantial damages. Most tenants in the building were older, had lived there for
20 years or more, and wanted to remain in the building. But in addition to losing their
possessions, the tenants needed to move as the building no longer was habitable. The
landlord spent hundreds of hours helping uninsured tenants fi nd new accommodations
About the Author
Melissa Neis is Vice
President of Chicago-based
Parr Insurance Brokerage,
an independent insurance
agency founded to protect
high-net-worth individuals
and families. After working
several years in the arts, she
joined the Parr team in 2005
to apply her knowledge of
art to the insurance world.
Melissa graduated from Illinois
Wesleyan University with a BFA
in painting and a minor in art
history and earned her MBA
from University of Notre Dame
in 2013.
The Crucial Missing Clause In Apartment Leases? Mandate For Renters Insurance
PH: 773.489.3001 FX: 773.489.5908 www.parrinsurancebrokerage.com
Affords Landlords Greatest Protection, New Software Programs Facilitate Tracking of Policies By Melissa Neis, Parr Insurance Brokerage
while concurrently quarreling with them over who was
responsible for replacing their belongings. Although
the landlord had insurance to replace the building, his
business suffered as a result of the time, energy and
stress of assisting uninsured tenants throughout this
traumatic event.
A tenant started a bath in her unit in Florida, then left
the bathroom to answer an hour-long phone call,
forgetting she left the water running. The tub overfl owed
and water cascaded down to the apartment below,
creating signifi cant damage to that tenant’s bedroom
furnishings, computer and television. Neither tenant had
insurance. The tenant in the apartment below sued the
landlord to pay for the damages, again a case where the
building’s insurance compensated the tenant…and the
landlord’s premium rates surged.
We frequently hear horror stories such as these
from landlords. And often there are situations when
uninsured tenants will argue, rightly or wrongly, that their
belongings were damaged due to an issue with the
building, and may even fi le a suit to recover such costs.
Then, the court needs to determine who is liable.
However, tenants with renters insurance can alleviate a
number of these potential issues. Such policies provide
a source of recovery to landlords for damage to the unit
if the tenant is at fault and to tenants for their personal
property damage…and a way to avoid any dreaded days
in court for both parties.
In addition to higher premiums, legal issues, and the
wasteful time spent to handle such matters that a renters
insurance policy can prevent, another negative impact
is the potential of rent delinquencies. Tenants without
insurance can face major cash fl ow problems when they
must repair or replace property with their own funds. This
can lead to slow or non-payment of rent.
Why the Reluctance?
Despite potential dire consequences, many landlords
still resist mandating renters insurance. Until recently,
such reluctance was understandable. Apartment owners
would cite the diffi culty to track and the burden to ensure
policies remain in place for their many tenants.
Yes, a tenant can display proof of insurance upon the
lease signing, but is the policy maintained? Do checks
for premiums bounce? Does the tenant allow the policy
to lapse? Is the coverage adequate? Another scenario
may fi nd a tenant happy to adhere to the mandate, but
wanting the landlord to help fi nd an insurance carrier. Yet
one more burden to handle.
Another issue, although not as prevailing, is the concern
that prospective tenants may decide not to sign the
lease because of the insurance requirement and the
additional cost, even though such protection is in their
best interests. Occupancy rates could decrease, some
landlords may believe. This is a shortsighted perspective
for tenants to take when for the price of – say, one pizza
delivery a month – insurance will guarantee protection
against potential fi nancial disaster.
New Software Programs Offer Remedy
Fortunately, available now are new sophisticated
programs landlords can offer to tenants that feature
software to meet these challenges, particularly in
eliminating cumbersome insurance tracking processes.
For example, these programs can:
Provide landlords real-time access to tenant policy status
Deliver instant online notifi cation when a tenant’s coverage goes into effect and if it’s cancelled
Enable tenants to report claims directly to the
insurance company
One program our fi rm offers, Suite Protector, also affords
signifi cant benefi ts to tenants. It:
Allows tenants to purchase insurance in mere minutes via a user-friendly, web-based platform
Features pre-approved enrollment without credit checks or underwriting questions
Permits online credit card payments
Offers broad coverage including water backup limits, medical reimbursement and emergency living reimbursement, and the opportunity to purchase comprehensive personal liability and contents protection
To utilize Suite Protector, landlords complete an
application for each building, including a break out of the
units. Once underwritten, properties are then pre-loaded
into the system and all tenants are automatically pre-
approved. No service work is needed by the landlord or
the property manager.
Stipulating Renters InsuranceWhether a landlord offers one of these new software
insurance programs, or simply wants to ensure tenants
have renters insurance, the lease must clearly address
the requirement as well as specifying the minimum
acceptable coverage. It may be wise to enlist an attorney
to review the clause in the lease.
According to Julie Jacobson, principal attorney at
Chicago-area based Kovitz Shifrin Nesbit, a leading
condo, homeowner and townhome association law fi rm,
in addition to language that requires a policy, the lease
should state:
A tenant must offer proof that the policy is in effect prior to occupying the unit
A landlord may lawfully evict a tenant if the insurance lapses or if the renters fails to have certifi cation of insurance
Any legal charges incurred with insurance policy violations to the lease will be the responsibility of the
tenant
With proper, legal language in the lease, landlords can
proceed to institute this important rule and attain the
proverbial win-win that mandating renters insurance can
deliver.
As outlined here, the fi nancial benefi ts for landlords
can be signifi cant. They can incur fewer losses and
can achieve increased operating income by retaining
revenue, i.e., lower insurance premiums, that would
have otherwise been applied to uninsured tenant losses
to rental units. Simply stated, landlords can stabilize
costs and mitigate risks.
In addition, astute landlords can use the insurance
mandate as a marketing tool instead of an obstacle to
securing tenants. The ease of obtaining the insurance
should be viewed as an amenity for tenants. It also
represents an opportunity to provide valued counsel to
prospective tenants, reminding them that the landlord’s
insurance covers only the building and not the tenant’s
personal property or personal liability.
Likewise, tenants themselves will be adequately
protected, whether they feel it is necessary or not.
They can avoid huge fi nancial losses from possible
liability issues, damages to personal contents, damages
sustained by other tenants due to hazards from the
tenant’s unit or the cost from temporary relocation, if
needed.
Then there is the benefi t for all concerned that does not
carry a price tag, but is signifi cant. And that’s peace of
mind.
www.parrinsurancebrokerage.com
About Parr
Chicago-based Parr Insurance
Brokerage is an independent
insurance agency founded to
protect high-net-worth individuals
and families nationwide with
customized insurance coverage
for fi ne homes and possessions.
Through national and global
carriers, Parr Insurance provides
coverage for high-value homes,
automobiles, valuable articles,
and collections. For more
information on Parr Insurance
Brokerage services, contact an
agent today.
2157 N. DAMEN AVE.
SUITE 2B
CHICAGO IL, 60647
P: 773.489.3001 F: 773.489.5908 E: [email protected] www.parrinsurancebrokerage.com