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How Being At Fault While Not Financially Responsible Works
By Ray Chodos, November 2004
While sitting at a traffic light waiting for the green light, you are slammed from the rear by a drunk driver who never saw you and didn't even attempt to stop. Clearly, you are an innocent victim with no fault in the accident. Unfortunately, you are severely injured, suffering several broken bones and an operable lower back injury. Medical bills total $150,000. Because you couldn’t work for over a year, lost wages climb to $50,000. You seek to be compensated by the party at fault (the drunk driver). After investigation, it is determined that the at-fault driver has only $50,000 in liability insurance. Sadly, further investigation reveals that the at-fault driver has no assets and earns only a modest salary.

You can demand that the at-fault party pay the $200,000 for medical expenses and lost wages. Chances are excellent though that the drunk driver will not willingly pay. A lawsuit is filed and three years later a jury returns a verdict for $350,000 plus $100,000 for punitive damages in favor of the plaintiff. The system worked, right? This is known as a "hollow" verdict. It is hollow because the insurance company is only responsible for $50,000 of the verdict. Under the law, the balance of the verdict is the at-fault party's responsibility. However, recall that the at-fault party in our example has no assets. As for the punitive damage portion of the award, most insurance polices specifically exclude punitive damages, and certainly, the drunk driver has no means to pay it. In the reality such a suit would likely not have been filed since the end result is predictable and litigators as well as plaintiffs are interested in financial compensation.


In many situations affluent families can utilize legal entities to achieve unattractiveness to litigation claims that can destroy family financial security.
Ray Chodos and Adam Chodos, Esq., CPA are members of the Wealth Preservation Group LLC, a Greenwich, Connecticut based planning organization specializing in wealth preservation, business succession, executive benefits, interacting with the legal and accounting communities. Find more information at www.WealthPreserve.com.
 
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How Being At Fault While Not Financially Responsible Works
While sitting at a traffic light waiting for the green light, you are slammed from the rear by a drunk driver who never saw you and didn't even attempt to stop. Clearly, you are an innocent victim with no fault in the accident.

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