All Forum Posts by: Dan N.

@Dan N.

No. They will sue you for damages you caused. If they got incapacitated for life, a judge or jury decides it's $1 million, then the judgement will be $1 million. Has nothing to do with you getting the property for $25K and you stuck it in an LLC.

I discussed the matter of an LLC shielding me from liability with several attorneys. The consensus it doesn't. One attorney says when he sues, it's both the owner and the LLC. I asked "why"? He explained "if you didn't shovel snow, someone falls and gets injured, it's YOU that didn't shovel, not the LLC". The only around it is having a PM take responsibility, have insurance, and he'll be sued.

Having umbrella insurance is good for another reason. I once had two customers in the waiting room chatting. I walked in and they had no idea I was the owner. One told the other how easy it was to stage a trip and fall, sue for $10K, and owners usually settle because it's such a pain. What happened? He staged a slip and fall a few weeks later, got an attorney who got after me. Called my insurance agent who convinced me to file a claim, and the insurance company will act as my attorney. I got back to the attorney, gave him the number for my insurance and they'll handle everything. The claim was for $10K. Nine month later, the customer came in, complained his attorney stopped taking his calls and could I help. I called the insurance company, they looked up their file, advised me the attorney send then called 3 times and send 3 demand letters, and usually does no more, as they work on a contingency basis. When my customer got back to me, asked if my original offer to pay for a doctor visit is still good, told him no, because he went to a lawyer. Funny, he still patronizes me business but told him he has to be escorted to the waiting room from now on because he's so clumsy.

I would have to pay an attorney quite a few bucks or pay he scammer a few bucks to go away. The insurance company took care of it for free. 

 Damn that is quite a bit! I've lost a couple thousand on inspections as well over the years. Maybe for the next property, offer a bit less in anticipation of a major issue being found. It is tough right now as sellers still think we are in 2022/2023 market. The problem(/blessing?) is that the Fed is expected to lower the rate so that we may see more buyer demand and prices wil hold steady. Stay cool and don't jump into a bad investment!

@Dan N.

Liability coverage has nothing to do with the value of the asset. It has everything to do with what litigants can sue you for. If you owned a property with a broken stairwell where someone trips and falls, got incapacitated for life, why would their damages be restricted to $170K. I bought a business where the prior owner was sued for $3 million causing injuries to some customers. I was familiar with details of the case after I took over the business and his employees who has to take time off from work to attend depositions.

What happed in that lawsuit? The owner had $1 million liability insurance. The litigant attorney only learned the owner moved to Florida after selling the business and bought a home there. Because of the state's homestead laws, they cannot sue and take the million-dollar home. My employee was giggling when they told me the attorney taking testimony from them banged on the table, angry and yelling "we got screwed". They settled for the $1 million.

As to umbrella insurance being not relevant, I spoke to the owner a little later, he also thought the liability insurance was irrelevant little realizing that's what saved his hide. He knew nothing about Florida's homestead laws either as many in New York back then retire to Florida. He got away easy without realizing how lucky he was.

I owned several rentals back then and the business and my insurance agent thought $3 million umbrella coverage overall should be enough. Adding another million or two didn't cost that much back then. The $3 million number had nothing to do with the value of my rentals or business, but how large a lawsuit would be if something happens.

One more thing. Attorneys tell me having the LLC means little as they'll sue the owner personally and the LLC for negligence anyway.

@Dan N.  I believe most house insurance policies have a standard minimum anyway, typically $300k is the standard that comes with a fire insurance policy.  But to the excellent point above, for liability you should definitely go higher and it's usually not too much more expensive.

@Dan N.

I hear you.  It's still a sellers market so it's tough to get concessions as a buyer right now.

Are you trying to house hack or is this just an investment?