Protecting yourself from common liability risks

An unwelcome consequence of prosperity is that high-net-worth individuals become more vulnerable to the threat of personal liability suits, whether legitimate or not – especially in today’s litigious world. Each year brings a new peak in both the number of cases and the total amount paid out through a settlement or judgment. Here are today’s most common liability risks and our advice on how to safeguard against them. 1. Risk: Visibility A magazine feature about your home, social media posts, board service or a garage full of luxury cars — all can attract unwanted attention, even if you aren’t a celebrity. What you can do Limit social media posts highlighting your jewelry, luxury vacations, home furnishings, or other obvious signifiers of a high-end lifestyle. Before speaking in public, consider having your remarks reviewed by a professional to ensure that nothing you say could be construed as slanderous. 2. Risk: Minors and Young Adults As long as minors and young adults permanently reside at your address, you are responsible for their actions. The threat they pose to your liability increases as they get older, such as when they obtain their driver’s license or go to college, where incidents like hazing may occur. Additionally, their social media activity can lead to issues like cyberbullying or unwanted attention to your family’s lifestyle. What you can do As a rule, children are often unaware of liability issues, so it’s crucial to keep them fully informed, especially teenagers who are more likely to engage in risky behavior. Consider enrolling them in a defensive driving course and educating them on the significance of safe driving habits. As much as you can, limit or monitor their social media usage, and never allow alcohol or drugs at gatherings you host. 3. Risk: Entertaining Inviting a large group into your home can be a wonderful experience, but it also comes with elevated liability exposure. Serving alcohol can have serious repercussions should a guest be hurt in a drinking-and-driving or pool accident. What you can do If the pool will be open to guests, it is wise to hire a lifeguard, especially if children are present. Ensure that any outside vendors you hire are covered by their own workers’ compensation and general liability policies. Additionally, consult your broker about situation-specific liability protection. If you frequently host parties, confer with your wealth manager and attorney about transferring your property to a trust or LLC to create legal separation in the event of a lawsuit. 4. Risk: Renovations and repairs Any work being conducted on your property, whether it’s daily maintenance or new construction, exposes you to liability in the event of a worker being injured on the job. What you can do When hiring contractors, prioritize those with solid reputations. Limit the number of subcontractors involved and make sure everyone provides proof of workers’ compensation and general liability insurance. 5. Risk: Driving The potential trouble caused by automobile accidents has increased over the last several years. Texting, talking on the phone or looking at a vehicle’s screen is just as perilous as driving under the influence. What you can do Recognize the seriousness of taking eyes off the road, whether you’re getting directions or regulating the air conditioning. Use technological assists, such as Do Not Disturb, to help avoid the temptation of texting. And, of course, never drive while impaired. Proper Coverage Accidents happen, and with successful individuals increasingly becoming targets of costly lawsuits, it’s important to not only have personal liability insurance but the correct amount. Personal liability insurance is commonly included in policies like homeowners, automobile, and watercraft. It shields you from losses resulting from negligent acts that cause injury, property damage, or reputational harm, except in the event of criminality or malicious intent. However, the amount of coverage provided by these is often limited, therefore, we often recommend purchasing personal excess liability coverage which provides an additional layer of protection. Determining the proper amount of coverage requires a thoughtful conversation with your broker but you can start by taking our Liability Assessment Tool, which helps suggest a range of liability based on your lifestyle. The unfortunate truth is that personal liability risk is everywhere, and while it cannot be entirely prevented, paying extra attention to the scenarios that result in most claims will prove to be beneficial. ...

A guide to protecting your luxury wardrobe collections

A recent Sotheby’s auction was billed as the “Visionary Collection of Joseph Lau,” but it wasn’t the businessman’s art or fine wine – rather, it was 76 luxury handbags. This phenomenal collection included six rare Birkin’s and a bronze Kelly bag that fetched more than $3 million. Other record-breaking sales such as Air Jordans and feted couture exhibits, are just a few examples of the rising passion and interest of luxury wardrobes. Whether you are purchasing such collectibles as an investment, to pass down to future generations, or to wear now, we want to make sure each piece continues to be only a source of pleasure for you. Our guidance below will help keep your cherished collectibles in mint condition and ensure they are properly protected in the event of damage or destruction. Navigating the acquisition process With the luxury market soaring, sadly, fakes are too, especially in the sneaker and luxury handbag categories. The New York Times recently reported on the increasing number of “superfakes”—knockoffs so convincing even the best-trained eye can’t always tell the difference. Being aware of this counterfeit market is important for a variety of reasons, not least because most policies do not protect against fraudulent purchases. Therefore, if you are buying from someone other than an authorized dealer, you’ll want to take the following precautions: Research the seller, including reviews and feedback scores of previous buyers. Beware of discounts; if the item or deal seems too good to be true, it likely is. Educate yourself about the product, so you can confirm relevant details and spot potential issues, such as flaws in stitching and embroidery. Storing your collection safely Humidity, leaks, and harmful cleaning products are just a few of the many perils lurking when your collectibles are displayed or stored away. Therefore, we recommend the following safekeeping best practices: Keep everything in a climate-controlled environment—the industry standard is 70℉, 50% humidity—to prevent damage to leather and fabric goods. Similarly, your closet should not be exposed to direct sunlight or heat sources. Keep unworn sneakers in roomy boxes, to make sure they maintain their shape. Most experts recommend clear plastic since they are stronger than the original box. Empty handbags of everyday items and help keep their shape by stuffing with archival fillers like a purse pillow or acid-free paper. Wrap exposed hardware in a lint-free cloth and remove detachable straps. Store bags and straps in their own breathable, neutral-colored dust bag or the original box. Store hanging garments on non-wire hangers in breathable bags made of muslin or polypropylene. Also, place acid-free paper between folded clothing items, particularly knits and lace shirts.Consider professional storage spaces that cater to owners of couture collections, their sole focus is to properly store and transport clothing, shoes, and accessories. Precautions for wearing collectibles In the event you have that perfect occasion to showcase your couture or cherished accessory, you should consider the following precautions beforehand: Refrain from using oily, alcohol- or perfume-based products on your skin, because contact with them could cause damage to the collectible. Be mindful when eating and drinking, especially staining hazards like red wines. Choose carefully what you place in your handbag and always consider bringing a portable handbag hanger, so you never have to place the bag on the floor. Before storing, dust both the interior and exterior. Preserving the beauty of your collectibles Sneakers that you wear do not need professional cleaning, but they should be kept clean with products that won’t fade their color. However, clothing items or handbags that suffer stains or other marks should be professionally cleaned by a company that has sufficient experience in caring for high-value fashion and accessories. Therefore, look for someone who: Specializes in couture and designer handbags and will outsource to a relevant professional for any work they are unqualified to do on their own. Offers a detailed inspection of each piece and an explanation of what the work will entail. Package items in the appropriate materials, including acid-free paper and breathable garment bags. Protecting your investment Some insurance carriers offer special “wearables” policies, but often we recommend scheduling the items as part of your collectible’s policy. The relevant coverage can vary significantly, though most policies include theft protection, water damage, and other common risks. We suggest you keep a regularly updated list of every item in your collection and be sure to speak with your broker when you acquire a new piece. Also, be sure you check in with your professional to ensure your collection is properly covered. Whether you are drawn to a piece because of its unique features, designer, or storied history – this guide will help keep the original beauty preserved. To ensure your collection will be treasured for years to come, be sure you work with a professional with deep expertise in this luxury market. ...

Fine art on the freeway: joys and risks of collecting classic cars

Pebble Beach. Quick what comes to mind? If it’s a slow parade of lovingly restored vintage race cars and roadsters driving along the dramatic Pacific coast cliffs—and not championship golf—then you’ve most certainly caught the classic car bug. Working with car collectors is a joy because they are exceptionally passionate about their pursuit. Our clients not only appreciate the beauty and craftsmanship of these automobiles, they also have a blast with their acquisitions—driving, racing and sharing the experience with the tight-knit community of equally engaged collectors. Whether you have a Bugatti or Bentley competing in the Concours d'Elegance or are contemplating which vehicle will start you down this road, we’re here to help make sure your classic car collection brings more pleasure than concern. Below, our team answers a few common questions around protecting an investment in classic cars. What do I need to worry about? Everything that concerns a regular car owner—accidents, breakdowns and theft— but multiplied by 10. A classic or vintage car is fragile, rare and valuable. In fact, sometimes it is irreplaceable so there are unique risks when owning a collectible like this. What are some of those risks? Well, classic cars are unique, which means the risk of theft or scam is higher. For example, after participating in a vintage car show, you will want to take necessary precautions to make sure your car gets safely put inside the garage and not in the hands of a thief. Another concern is market scams, which happen more often than you think. One client bought a vintage car on eBay only to discover that the purported “original” parts were decades younger than the rest of the car (meaning the parts were replaced…not refurbished as most collectors would want). To minimize these risks, we recommend to only buy from reputable dealers. In addition, have the vehicle appraised by an independent expert and demand proof you are buying from the rightful owner. If you need help securing the right vendor, your broker can provide you with a list of recommendations with deep expertise in the market. Should I actually drive my car(s)? Absolutely! That’s what makes collecting cars more fun than collecting stamps. But, be prepared for breakdowns—have a trusted towing service and knowledgeable mechanic lined up before you hit the road. And (buzzkill moment…) no personal automobile policies cover drag racing. So as tempting as it may be to reenact a scene from American Graffiti, a claim involving an accident will most likely be denied. How should I store my car(s)? We recommend you store it in a well-equipped garage with suitable alarms and security systems. Make sure the building protects against rain, ice, floods and whatever natural disasters are common in your area. That means if it’s in a separate structure on your property, it should conform to the same standards of your main residence—you may not want to situate it in a low-lying area or have a flat roof where snow can pile up all winter long. Even a slow leak or a few diligent mice can cause a lot of damage, so make sure someone checks on the car regularly if you can’t. Does my regular auto insurance cover my car(s)? Not really. You might buy coverage for your Lamborghini from the same company that insures the family Lexus, but the policies need different terms. Most important, the “settlement agreement” should treat the value of the car like a work of art that fluctuates with the market, because traditional insurance assumes a car gets less valuable every year. Whereas your car, most likely appreciates over time. With that said, you will also want enough coverage to recoup a loss that happens after the car appreciates. Similar to art, don’t forget to get it appraised every three to five years to keep the policy limits in line with the market. Do you recommend any other protections for my policy? We always recommend having a quick chat with your insurance broker. That will allow you to discuss the specifics surrounding your car(s). However to whet your appetite, here are two critical points worth noting as you pull out your policies. The policy should cover “diminution of value” of the car after an accident in addition to the repair costs. As we alluded to earlier, if that fender-bender means you need a new fender, the car is worth less than if it still had the original steel, even if there’s no difference to the untrained eye. You might want to consider “full transit coverage.” No, sadly this does not mean coverage when you ship your car cross country to participate in the Pebble Beach Car Rally. But rather, if you have a covered loss and need to transport your car for repairs, this coverage can be worthwhile. We may have just scratched the surface on your long list of questions, so set aside some time to speak with your broker. They are available to assist you with any concerns or additional questions surrounding that newly purchased classic car or the red beauty that is already a part of your collection. With a few precautions, you can spend the next sunny day on the open road, not a cloud or worry in sight. ...

Smooth sailing ahead: what you need to know about yacht insurance

Island hopping through the Caribbean or cruising the Mediterranean, yacht ownership should be a sun-filled dream come true. But, as every seafarer knows, storms and structural mishaps can quickly turn the dream into a nightmare. Contributing to that nightmare, yacht insurance policies are notoriously demanding and their terms are extraordinarily complicated. To help you navigate these complicated insurance waters, here are our insights to help ensure that you are never left high and dry. Current Conditions Securing yacht insurance has been a challenging task in recent years due to various factors including increasing natural disasters, regulatory changes, and economic shifts. The overwhelming payouts have forced several carriers out of the industry, and those that remained not only increased rates significantly but became extremely picky about who and what they would insure. In fact, today, many carriers would prefer to not cover first-time yacht owners at all. So, the first thing we tell people who ask about insuring a yacht is that the process will be an intricate one. Needless to say, it’s more important than ever to find an insurance professional who has the knowledge to put together a successful package, and the strong industry ties to get it done. The Right Approach For Securing Yacht Insurance Unlike some other more pro forma coverages, this one is neither quick-binding nor set-it-and-forget-it. It will take some work to get adequate coverage, then require more communication with your broker to adhere to the carrier's demands. These suggestions will make it easier to do both: Lean into the process: To obtain insurance, your broker has to paint your circumstances in the best possible light, and that is going to require know-how (theirs) and time (yours). Our watercraft team has the advantage of having worked for carriers, so they understand exactly what underwriters need to see, but they can’t create that packet of information without your help. Be prepared to answer questions: Underwriters want to know everything, from the primary mooring spot (although the bigger the yacht, the less it matters) to cruising itineraries to hurricane contingencies to who is your captain and crew. If you are buying a pre-owned yacht, you also need an accredited appraisal of its condition and value. Keep your insurance professional on speed-dial: Making sure you are properly protected means thinking beyond the vessel itself. Specifically, your insurance professional should review all contracts for marinas, shipyards and the like; few of those entities provide the blanket coverage you would expect them to, instead offloading as much liability as possible onto vessel owners. And to make sure your insurance remains valid, you will need to keep your insurance professional apprised of all operational changes, especially in personnel. Many carriers reject captains who they deem too inexperienced. It’s also important to let the insurer know, via your broker, whenever there are navigational changes. Four Concerns That Could Put You In Deep Water Yacht ownership comes with its own set of potential problems which is why proper coverage is essential. Here are some of the potential worries: Gusts and gales: When the winds blow, vessels get tossed about even when they are tied up at a marina. Big storms can rip pilings out of the ground, and that is bad whether it is your boat’s moorings or not, because once one boat is let loose, it can ping pong destructively through neighboring vessels. During those 2017 catastrophic storms, thousands of boats sank, but many others ended up on dry land, up to 1,000 feet from the water. Lightning: This is becoming more of an issue as vessels become more sophisticated. A strike can wipe out an entire electrical system, and these days that system can cost a million dollars or more. As a result, carriers have increased lightning deductibles. Fire: A bad shore power connection, an engine issue, shipyard carelessness ... any of these hazards can lead to costly damage, particularly because many boats are highly flammable. Groundings: Professional captains significantly cut down on the incidence of groundings and collisions. Nonetheless, the possibility remains, especially in crowded sea lanes such as those off the coast of Florida and in the Caribbean. A Tight Ship: What Needs To Be Covered Appropriate coverage protects you when there is loss of property, liability claims and environmental damage. The essentials include: Hull and machinery: Think of it as property coverage for your boat, protecting not only the vessel and its infrastructure, but also some personal property, tenders and recreational watercraft, even the mopeds you use to zip around towns after you dock. However, though helicopter pads on your yacht can be included, the helicopters will require additional coverage. Protection and indemnity (P&I): This provides coverage for your liability for anything, fixed or floating, that your yacht hits. It also encompasses bodily injury to passengers or the crew, property damage and a mariner’s version of workers comp. You also want your P&I policy to reflect your intended navigation area. If you are going to be cruising internationally, your policy must be able to respond every port around the world (note: this is why a great majority of yachts are covered under one of 13 P&I clubs). Wreck removal: Should your boat sink, the local jurisdiction may mandate that you remove it. That is quite an expensive proposition. Vessel pollution liability: This is another requirement in many jurisdictions— the United States made it mandatory after the Exxon Valdez oil spill. Frequently rolled into P&I, it also covers fines and penalties incurred for causing damage to natural habitats such as reefs. Yachting is almost by definition an interstate activity, so maritime insurance is less regulated than most other coverages. One benefit of this lesser oversight is that much of it can be tailored specifically to your— and your vessels—needs. We understand the tremendous pleasure that you expect to receive from yacht ownership, so we look forward to using our all-hands-on-deck approach to make sure nothing ever rocks your boat. ...

Think before you post: a social media risk guide

In the 20 years since the beginning of its now-ubiquitous popularity, social media has transformed both society at large and our personal lives. From Facebook to Twitter, Instagram to TikTok, the various platforms—today used by 72% of Americans, according to the Pew Research Center—now regularly impact politics, commerce, work and relationships. They have inevitably caused a concerning increase in the daily risks assumed by every user. Though risk is rarely considered on a post-by-post basis, as insurance professionals, we are well aware of the negative outcomes. There was, for example, the client whose diamonds were stolen after she posted about them and included her whereabouts. And the client who was sued after uploading false, negative reviews about a retailer whose service failed to meet his expectations. Unfortunately, the list goes on and on. Of course, we don’t expect you or your family members to abstain from social media, but we do want you to know what can go wrong. These are the biggest issues and what we suggest you do to avoid each. Scams and fraud How it manifests: A recent report by the Federal Trade Commission found that criminals are targeting people on social media at an alarming rate. Individuals reported around $770 million in losses from social-media-centric rackets, such as investment frauds and shopping scams, in 2021 alone. These days, many involve fake cryptocurrency payments, with nefarious individuals posing on Twitter, Instagram or Facebook as successful billionaires like Bill Gates and Elon Musk, or as friends or family members to offer “tips” or otherwise ask for financial contributions. We have even seen pretenders declare themselves to be representatives of some cryptocurrency exchange platforms. How to protect against it: No matter how great the opportunity appears, never give money or account information to anyone online. Before investing, we recommend you consult your wealth manager or financial advisor. Legitimate opportunities can always be vetted. Note that even if you maintain fraud insurance and/or cyber policies, it is important to act prudently as coverage may not apply for every situation. It is also important to speak with your insurance advisor, regardless of the coverage you have in place. In short, no one is shielded from bad decision making or improper vetting. Digital doors to your home and accounts How it manifests: You might think you are sharing something mundane, but expert eyes can put it to use for their own unsavory purposes. For instance, whenever you, your children or even your household staff post photos of your home and its surroundings, it can potentially provide outsiders with information about entry points or the art hanging on your walls or the times of the day you are usually home—or more notably, not there. Similarly, if you post about things like your birthday, your pet’s name, or your favorite movie, you may be providing scammers with information that could help them decode your password, allowing them entry into accounts and other private online areas. How to protect against it: Use privacy settings to your advantage. The best option would be to keep all social media accounts private, so you are only sharing information with a curated group of trustworthy followers. Make sure your children and domestic employees do the same. Also, always elect to use 2-Step verification when offered by an app or website login. Liability, libel and slander How it manifests: While those in the public eye face a greater degree of risk, anyone who participates in a public forum is responsible for the words and views they put on display. This can affect you adversely in a few different ways: If you are an influencer who is commodifying aspects of your lifestyle, you may not be covered by your personal insurance should someone sue you for libel, slander or bodily injury since that could be considered a business pursuit and therefore a commercial exposure not covered by personal insurance. Similarly, if your teenager is an influencer, whatever they say or do can be connected to you as a parent. The age at which they are deemed independent adults varies by state, so parental responsibility may hold even for those living away from home in “hype houses”, with other content creators. The risk is comparable to that of children living in fraternities, where liability responsibilities ultimately land on the parents. If your child bullies someone online or pulls a harmful prank, you may be held liable for damages. If you publish negative comments that are not based on facts on Twitter, Yelp, Google, or any other platform, you could be held liable for slander and defamation. This is especially true if you attack the character of an individual or business or otherwise intentionally aim to injure their reputation. How to protect against it: Influencers and others who use social media commercially should create and operate under a commercial entity such as an LLC, thus creating distance between the enterprise and personal assets. They should secure commercial liability insurance too. Regardless of whether your children are influencers or not, speak to them about the serious risks of social media and how to post safely. Of course, you also need to be careful about the content and tone of your own published comments. Only write posts that are fact-based and defendable. Remember that whatever you say in the public sphere can be used against you, legally and otherwise. To that end, we encourage you to be mindful about what you are sharing and especially with whom. We also always recommend that clients incorporate cyber insurance and excess liability policies in their risk-management portfolio, as they offer additional layers of protection, especially if you regularly use social media. If you have any concerns about risk related to social media usage, we are, as always, here to discuss and advise. ...

Protecting yourself in an ever more litigious world

Accidents happen. Even if you do everything to maintain a low profile— adhere to the speed limit, keep plenty of distance between you and your neighbors—there is still a rising chance that you will be the target of a costly lawsuit whether or not you are at fault. This is even truer for affluent individuals. To help you better understand the risks and mitigate any losses, we asked two of our Private Client team leaders, EVP and executive managing director, Cindy Zobian (CZ) and first vice president Steven Kent (SK), some frequently asked questions around personal liability in today’s ever litigious world. Why is it important to talk about personal liability? And why now? CZ: Simply put, people are more likely to sue one another today than ever before. Yet, we still see successful individuals and families who do not have enough personal liability coverage. These cases often involve auto accidents or injuries that occur on someone’s property, but claims can arise in nearly any situation. For example, a teenager who is accused of cyberbullying or a golfer who doesn’t yell “fore!” and then hits someone with a wayward shot. Expect their victims to sue, particularly if they perceive the other party to be affluent. SK: That’s true. I think it’s fairly common knowledge that affluent individuals are targets for lawsuits. However, you don’t have to be driving a Maserati to be targeted. There are so many ways for someone to conclude you are successful. Social media makes it easier for people to determine that you have money and would be worth the effort to sue. For example, if your profile has pictures of you standing in front of your Malibu mansion, you are more likely to get sued than if you’re standing outside a modest ranch. It’s important to be mindful of what you are posting publicly on social media. What if my lifestyle isn’t conspicuous? Will I need less liability protection? SK: Not necessarily. The affluent are more likely to live, work and play around people who own things that are costly to replace if damaged. CZ: Exactly. For instance, in one extreme case, a fire broke out in a client’s apartment in Manhattan. Their neighbors’ apartments were damaged. In fact, there was considerable smoke damage in one unit, which affected their neighbor’s priceless art and rare antiques collection. In addition to the damage, the residents expected to be put up in nice hotels while the repairs were being made. Our client’s insurance company ultimately paid tens of millions of dollars in claims. But most high-net-worth people are properly protected, right? SK: Excess personal liability insurance, often called “umbrella” policies, cover you against claims of injury to people and damage to property. Typically, your auto and homeowners’ policies have coverage included up to a certain limit. Umbrella policies provide additional protection over and above that limit. When we meet new clients it’s not that uncommon to find that they have very little or no umbrella coverage. That’s why it is so important to have a conversation about this. CZ: Accidents happen. For example, a few years ago, one of our clients had a relative visiting from out of town who borrowed his car. Unfortunately, the relative was not familiar with our roads and ran a stop sign, causing a bus to swerve onto an embankment and roll over. While there weren’t any passengers on the bus, there was a pedestrian riding a bike on the embankment who sustained serious injuries. This is an extremely unfortunate case but the bottom line is that while our client was not actually driving the car, he was still sued. How do these types of situations generally pan out? CZ: A few cases go to trial, but most are settled privately. We’re also seeing larger settlements regardless of who was at fault. We had a client hit a pedestrian who was texting while he was walking across the street. The driver, our client, had the right of way. Regardless, his insurance company ultimately paid out a six-figure settlement. Is there such a thing as too much liability coverage? CZ: We get this question a lot which is why we developed our proprietary tool, What’s My Liability. This tool calculates a suggested range of liability coverage. There’s no magic number to determine the correct amount because it really depends on the value of the assets that are being protected and the individual’s risk tolerance. We strongly suggest that you talk to a professional for further guidance. SK: For most of our clients, I’d say that if their limit is below $5 million, they are effectively uninsured. You can get coverage up to $50 million with little hassle. We do have a few clients who are in the public eye and are more concerned about being magnets for lawsuits. For reference, those clients carry more than $100 million in personal liability coverage. Any last thoughts? CZ: It’s easy to get this wrong, and the ramifications can be serious and expensive. So it’s always worth a 10 minute chat with a professional to make sure you and your family are properly protected. We’re here to help! ...