Let's say you are there is a four-car accident on the highway and you are partly responsible for causing the accident as well as two of the other drivers. One passenger in one of the cars is badly injured and sues all three of you. The court awards a $1.2 million injury judgment in favor of the passenger and assigns 1/3 of the fault to each driver.
The other two drivers carry bodily injury liability insurance with a limit of $25,000 per person and they have no assets. You carry a limit of $250,000 per person in bodily injury liability insurance and you own real estate and other valuable assets worth about $1 million.
With a little math, you figure your liability will be $400,000 since you are 1/3 at fault. The insurance company will pay the $250,000 and you'll have to come up with the remaining $150,000 to payoff the judgment. It's a lot of money no doubt but with your net worth you will survive. Your out-of-pocket expense might be just $150,000 if the suit is filed in most states but not if it's filed in say,
If you happen to be sued in one of these states, you will have to pay the entire balance since the other at-fault drivers do not have assets. It’s wrong but it is the law.
Now the three insurance companies will pay a total of $300,000. So you will be on the hook for the remaining $900,000! The reason for this wrong-justice is the common law rule called Joint and Several Liability.
JOINT AND SEVERAL LIABILITY
The theory of Joint and Several Liability allows that each defendant in a legal action is responsible for the entire amount of damages that a plaintiff is entitled, regardless of their relative degree of responsibility for the damages involved. This has come to be known as the "deep pocket rule" because it has had the effect of turning lawsuits into all out searches to find the most financially lucrative defendants. The search for deep pocket defendants has created a "lottery" atmosphere within the legal system in this country.
So if you are sued in the wrong state and you have a deep pocket, you will be the one the hungry lawyers are looking to pin some degree of fault so that they can collect the entire judgment from you.
To protect yourself from joint and several liability, you must not appear to have a deep pocket. The only way to do that is to get assets out of your name. I'm sure you've heard of the quote from John D. Rockefeller. He said: "Own nothing and control everything." There is no better application for this philosophy than to protect yourself against the risk of joint and several liability.
On February 29 - March 2, 2008 I'll be conducting my private seminar for 14 people on income explosion and extreme asset protection where those 14 people will leave with everything set up and in hand and the knowledge of how to use everything they learn. I guarantee this event will be unlike anything ever presented because the event is for the 14 people in attendance and built around their needs.
Now go buy a house,
Gerald Romine
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