In representing people and businesses in the type of law that I most frequently practice, minimizing risk is usually a key goal. Minimizing risk usually includes some combination of traditional insurance (life, liability, long-term-care, health, disability and other types) and legal tools.
In some instances, even massive and comprehensive insurance policies cannot provide what limited liability companies and other legal tools can provide. Similarly, there is certain value that insurance brings to people, businesses and farmers that legal tools cannot provide.
Clients often ask me why “so and so” is so lucky or how it is that great opportunities seem to fall into the laps of certain people. Obviously, successful people have many attributes, but most often, in the business context, successful people sometimes get fortunate “breaks” because they are out actually “doing deals.”
For example, a responsible real estate investor may carefully research the purchases and sales of various properties. There is no guarantee that any particular investment will be successful, but the investor is taking risks and participating in the marketplace. By virtue of participating, the investor significantly increases the possibility that someone else may desperately need a certain property at the very time that the investor owns the property.
Similarly, if a great opportunity presents itself, the active real estate investor is more likely to be positioned to imminently sell some other property in order to purchase the great opportunity.
However, obviously, the more activity there is, the more need there is for tools such as LLCs, trusts and other resources to protect assets and ensure that unintentional mistakes are not fatal to the business or entrepreneur’s professional existence. Of course, this protection must always also include traditional insurance.
I regularly help my clients analyze the sufficiency of the scope and magnitude of their liability insurance. I very infrequently encounter a client who is over-insured.
Most importantly, often the biggest value of insurance is having insurance, not how much insurance it is. This is because insurance almost always includes “legal defense.” Yes, the insurance company will literally hire and pay an attorney to represent you!
So, in the midst of a business or personal mistake or even a car accident where you are alleged to have done something wrong, if you have insurance with “defense,” the insurance company will pick up the tab for the lawyer to defend you.
This responsibility of legal defense is sometimes even arguably stronger than the coverage itself. I represent a business owner who had insurance for his business. An employee of the business made a mistake, and the insurance company argued that the insurance policy did not cover the particular mistake that the employee made. Nonetheless, the insurance company hired a law firm to defend my client from the party injured by the employee’s mistake. In that case, I monitored the case, but the insurer paid the legal defense team that did the heaviest lifting.
Legal defense is an often hidden but incredibly valuable attribute of insurance for people and businesses.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.