It doesn't sound like anyone has had a lawsuit as exciting as the one that I am in the middle of. In this case, insurance was useless, but there was one very important lesson learned.
So the LLC that owns one of the property's that I control, along with my current PM, was named in a lawsuit. It seems that a guest of one of the tenants was shot while attending a party. Hmm, I had not heard of any shootings while we controlled the property, so I looked at the occurrence date. The date was prior to our ownership, so I requested that we are taken off as a named defendant. I received no response until I received another document with more information and a questionnaire. It seems that it is being inferred that by buying the property, not only did I buy the asset, but also the liability. Here is a good reason why to not to buy an entity to avoid increased taxes due to the property sale, or other advantages. Well, we had not bought the entity and therefore should have no liability for the previous owner's liabilities.
So I contacted our insurance carrier to see if they would write a letter to get us off the defendant list. The only letter I received back from the insurance, was one that stated that they were not the carrier at the time of the incident and therefore would not defend us.
So onto a 5k retainer to get a lawyer to write a letter stating that we had no liability in this case and to be taken off the suit. We are still waiting on the response. In the meantime, I did answer the questions on the interrogatory. I will let you know what the results are as they come in.
I do want to add some flavor to this story and fill in the premise of the lawsuit. It seems a party guest was shot in the back and had $12,000 worth of medical bills. That number is correct. For that cost, she must have received a bandaid and an aspirin. The suit goes on to claim that the owner was negligent in protecting the guest and warning them of the possibility of something of this nature occurring. They claim that the owners should have been aware of the "likelihood of an occurrence" of this type and should have protected the guest and warned them of the possibility of another occurrence.
Now, why should the owners have thought to protect the guest form this incidence, and had warned her?
Wait for it
Wait for it
Wait for it
Wait for it
Because, 7 years prior to this incident, there was a similar incidence on the property.
I told my lawyer, that if they do not take us off the suit, we will countersue for our expenses. They say, if you are in RE and you have not been sued yet, you will be. Just make sure that you are covered. So the lesson learned is to make sure in every transaction, I make sure that there is a clause that the seller will indemnify and defend us for any case coming from an incident that was prior to our ownership. This clause is to survive the closing.
