Is malpractice and/or liability insurance enough to protect my assets?
By: Barry E. Haimo, Esq.
November 29, 2013
Malpractice insurance is the first line of defense with respect to liabilities deriving from you providing professional services. However, there is a limit to the coverage you can enjoy, and often insurance companies find ways to avoid paying. After all, there’s a whole area of law dedicated to insurance coverage disputes. Since insurance coverage is limited to the purpose for which it is obtained (such as professional malpractice), and creditors can still attack your personal assets, it’s important to engage in asset protection planning with an attorney that focuses exclusively on that area.
To add further clarification, as an owner of your business, you probably believe you are not exposed to personal liability. That’s probably why you incorporated in the first place right? Well unfortunately, that is not entirely true. Some accountants place people in s-corporations because they are most advantageous for tax purposes, but they lack the protection of limited liability companies (LLCs) and limited partnerships (LPs). Consequently, your ownership interest is at risk of being taken away from you even if you’ve played by the rules. That’s because a single-member LLC and any corporation (including s-corporations) do NOT protect owner’s interest in them from creditors of themselves, personally. Therefore, creditors of an owner for a personal liability can attach to the business interest and take it away to satisfy a judgment. This is probably very frightening to you as a business owner.
The bottom line here is to obtain liability insurance (especially malpractice) if you can. Invest in strong agreements with customers, vendors, and employees. Convert to a business entity that provides more protection for business and personal creditors. There’s many tools to use, such as annuities, qualified retirement vehicles, homestead, trusts, etc. so be sure to engage in Business Planning and Asset Protection Planning to ensure you are protecting your business and your family.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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