Would you rather be personally sued, or have your business sued ?

[fastfredracing]

Im having a back and forth with my agent this morning . I want to get Pa commercial plates to run on my tow truck and all my personal vehicles . 100% legal, spelled out in black and white in Pennsylvania's vehicle code. I have operated like this several different times over the years.
They( my insurance agent) always tries to talk me out of it and tries to tell me its not legal, but they are 100% wrong .
My newest agent hates the idea that I would open my business up to a lawsuit should I have an accident in my personal car, with a business plate on. He says the lawyers will see the higher limits and come after the biz . Well ,no, they will actually be coming after the insurance company . Am I correct here ?
I honestly do not care how much my insurance company gets sued for, that is why I write them a big fat bloated check every month . I say the higher limits of my business policy, protect me even more, and better shields me personally.
I am trying to game the system to my advantage. It is perfectly legal , and I have done this in the past . I get to write off all my insurance and registration fees , instead of having to carry a bunch of different policies .
I have gotten some great advice here on insurance before, really appreciate it . 25 + years in the biz, and insuring it all without hemorrhaging cash , has always been a challenge

[unclebilly]

So here’s a question…

In Canada, in extreme cases including negligence, you can sue the directors of a limited company as well as the company. If this applies in PA, could someone come after you AND your company in the event of an accident (they may be able to anyway as you are likely operating the vehicle)?

If I was you, I would spend the money with an accident lawyer for 30 minutes of their time and ask them how this works. They are in the system and know their modus operandi…

[McLovin]

One of the biggest reason for the invention of corporate structures is to avoid/isolate yourself from personal liability arising from business activity.

So yea, generally you want liability for business activities to be limited to the assets of that business.

I have all of my properties and businesses under separate entities (LLCs etc) for that reason, as do most people. So, say someone trips and falls at one of my apartments. I’d rather have that apartment in an LLC, and have the LLC get sued, instead of me personally. Because of course with the LLC the claimant is limited to recovery against the assets of that particular LLC only.

But, your question is a little different. You are putting business plates on a personal car being used for personal use.

My gut sense is, assuming what you’re doing with the insurance is legal, you are right. I agree that the higher limits on your business insurance helps you in the event of a claim, not hurts you. Most cases/claims against an insured get settled, and the vast majority settle for policy limits or less. So, the higher your policy limit, the more sure you can be that any claim against you will get settled by the insurance company.

Assuming you own the business, the business assets are always at risk for you in regards to claims against you personally (like a claim arising if you cause a car crash). For example, if you get into an accident in your personal car and somehow someone gets a $100 million judgment against you, they could enforce that by levying against your ownership interest in the business. In that instance, you’d end up in the same place whether the car was plated and insured personally or in the business.

[GH85Carrera]

Start another business just to own the trucks. Rent them to yourself for a flat rate. You will need a IRS EIN number and the state registration and a business plan. You then have a layer of protection. Keep that company's assets in a separate bank account, and rent the trucks to your rental business or the repair shop as income. All expense are deductible.

[Shaun @ Tru6]

Originally Posted by McLovin

I have all of my properties and businesses under separate entities (LLCs etc) for that reason, as do most people.

One caveat is "single member LLCs." The government treats them as sole proprietors in terms of taxes and a plaintiff will argue it's a thinly veiled protection against personal liability. 2 or more members, not an issue.

[cstreit]

If you run personal plates they will come after you.

If you run business plates - could they come after your business AND then you?

I think the latter is true in which case you're doubling your risk.

[gregpark]

Yep, injury lawyers throw mud at everything and everyone possible to see what sticks. Bottom feeders, limit their ammo as much as you can

[speeder]

Originally Posted by unclebilly

So here’s a question…

In Canada, in extreme cases including negligence, you can sue the directors of a limited company as well as the company. If this applies in PA, could someone come after you AND your company in the event of an accident (they may be able to anyway as you are likely operating the vehicle)?

If I was you, I would spend the money with an accident lawyer for 30 minutes of their time and ask them how this works. They are in the system and know their modus operandi…

The second paragraph is excellent advice. The first is good advice but the laws may be different between Canada and the USA.

[john70t]

"Piercing the corporate veil" is the keyword.

Theoretically with an LLC it requires wilful deliberate gross malfeasance by the controlling entity (yourself).
-That might also apply to your representatives or their actions if it is well known and continuous over time.
-Or if a judge is having a bad hair day. M/F
-Or if any single one of your filings and paperwork is incorrect.
-Or if you personally 'borrow' money from company funds for personal reasons. No piggybank allowed.


The entire topic is a tax/legal thing well above my own pay grade..
1). Partnerships are like marriage, and all personal assets are put on the table. Beware.

2). LLCs are the easiest and cheapest ways to file taxes, and offers a layer of personal separation.

2).S-Corps also offer "pass-through" taxation but i think require much more documentation and ridged paperwork.

3). C-incorporation require and involves much more than one member, regular meetings, multiple filings, filed statements, etc etc etc.
https://www.wolterskluwer.com/en/expert-insights/s-corp-vs-c-corp-differences-benefits

[greglepore]

I agree with the advice above, but ...
You're married, right? Your real estate all owned by you and your wife as "tenants by the entireties", right? Those assets and bank accounts held that way are pretty much judgement proof in Pa until one of the spouses dies, or there is joint liability (very unlikely in an auto scenerio). So, cars in personal name and a 1 mil umbrella (cheap) is pretty sound protection.
OTOH, if the business has assets (building etc.) they might actually be easier to chase with a judgement.
I suspect the agent is cya the company, particularly if they don't insure your personal property, but in any event it may not make much difference to you given the above, and might even be safer in individual names if y'all are soundly married and healthy.

[john70t]

I think Fred has a "partnership" situation now but could be wrong.

He may need to to modify that...

[fastfredracing]

No, I am a sole proprietorship . I never LLC'd I have a partner in my other biz , which we are currently selling down and dissolving

[McLovin]

Well in that case it doesn’t seem to matter much. There’s no separation of your liability and assets.
You are already personally liable for anything that goes wrong with the business, and vice versa.
For example, if you got sued, it wouldn’t matter if the plaintiff named just you, just the business, or both.
If they sued both, they’re still really only suing you. It would read “Joe Blow vs. Fast Fred and Fast Fred, dba Fast Fred Racing.”

[McLovin]

My main concern would be with your own insurance company.
If you get into an accident on a business insured vehicle when you are using it personally, are they going to try to deny coverage?
You need to read the policy carefully to be sure you understand it.

[cabmandone]

If you're a sole proprietor, there isn't any real difference between the business and you as far as I know. So they'll sue you regardless what the plates say. Even a sole member LLC offers some level of personal protection. I was taken to small claims once by a customer when I was selling manufactured homes. I explained the error in the filing to the judge. He still found me personally liable.. so I appealed and smiled when I walked back into his courtroom when the case was sent back due to the error.

A wise, wealthy friend once told me "f'n umbrella policies are ridiculously cheap. Get one"

[drcoastline]

Let me start by saying I am not lawyer and not offering legal advice. I am not telling you what you should, shouldn't do or how to do it.

I am an insurance broker licensed in NJ and PA and specialize in risk management. As usual there is good advice posted and if you take some of them coble them together with others you get better advice.

First it is important to know even with LLC's, Corps, LLP's, whatever, you can still be named and sued personally. The question is can they get to you personally? Second, the thought that someone is suing an insurance company needs to change. They are not suing an insurance company, they are suing you or your business or the LLC, S-Corp. what have you. If found negligent you, the LLC, S-Corp whatever is the responsible party, will have the judgement placed against them and come hell or high water that is who needs to pay the debt. The insurance company has simply agreed in exchange for compensation (your premium payment) to pay your defense costs and pick up the tab in certain cases. If the insurance company goes into receivership, bankrupt, denies your claim or you are found willfully negligent it's all on you they won't be there to write the check.

So step one, don't play games and understand what you are covered for and how, what your responsibilities are and that your carrier is financial stable so they are there when you need them. Also remember insurance companies don't want to pay claims, they don't want to write checks to law firms to defend you and don't want to pay out million dollar settlements. Make sure you understand your policy and you are doing what is required of you to be covered when the time comes and if they need to start writing checks they can and will. A+ or better by AM BEST.

Mentally let's set the scenario like this. You are Fort Knox. We'll call you Fort Fastfred.



You are a nice white granite building sitting in the middle of a green field in Kentucky filed to the rafters with gold. The whole world wants your gold. Is Fort Knox sitting there in that filed all by it's self with no protection? Nope, what do we see in that photo? A series of fences, barricades, guard towers, guards, lights and a whole bunch of protection we don't see.

So the first fence way out in front might be an LLC, S-Corp, or even a Trust. consult a competent attorney for what is best for you.

Fence two- don't comingle business and pleasure. Often time with small businesses funds get co-mingled and pay for personal items. This can cause a chink in the corporate veil were the business isn't acting as a separate entity and may put you at risk personally.

Three guards walking the fence looking for holes or breaches. Don't be willfully negligent, if something needs maintenance or attention attend to it immediately, do not defer or put off until tomorrow what can be done today or procrastinate. Attend to the issue as quickly as possible. Need brakes on the truck? But on brakes, Is there an oil spill by the door a customer can trip on sop it up. etc. Employees? Makes sure your equipment works properly OSHA.

Fence four is your underlying insurance policies. Premises liability, auto, Work Comp, etc. Here you will want to carry the maximum liability your companies offer and you can afford. This will also offer you sound legal counsel in the event a suit is brought, we might call this fence five.

Fence six look into excess liability this may be an umbrella policy or an excess liability policy. This policy will start paying once the funds in fence four have been depleted.

Fence seven may even be multiple entities. The Repair business may be one entity, the tow vehicles another and each of those has their own coverages? Of course this could get expensive.

Start by seeking out a competent attorney to get you set up. Then build from there.

Also, I think you stated you may be taking in a partner? It is imperative you have a rock-solid partnership agreement going in. You are friends and on good terms now. Iron out the exit strategy before going in and each individual's participation, involvement, financial contribution, etc. and stick to the agreement. Trust me when I say a business partnership break up is often as ugly and financially devastating as a divorce. Again, seek competent legal advice to set this up before getting started.

Lasty, as part of your question goes to personal. The same advise follows. Your assets are the fort house, bank accounts, investment accounts, etc. Maybe the house goes into a trust? Carry maximum liabilities, purchase an umbrella, put kids on their own auto insurance policies (maximum liability for them also).

The more fences people need to jump over, dig under get to fort fast fred the better.

[Shaun @ Tru6]

Great write-up Don, thanks for posting!

[drcoastline]

Originally Posted by Shaun @ Tru6

Great write-up Don, thanks for posting!

I hope it helps?

[drcoastline]

I guess the other thing I want to say is, I don't understand the agents though process? His concern shouldn't be so much if you are in an accident in a personal vehicle the business is at risk. The question and the problem to work through is, if that happens is there coverage to protect the business? Where do I get coverage?

The entity and the personal side are all yours. What you are doing is simply moving risk from one side (personal) to the other side (business).

Personal vehicles are often used in the course of business. The bookkeeper making deposits, realtors driving to various houses or placing yard signs. You can put a business classification on a personal policy to permit this usage so coverage triggers.

The bigger issue I see is a business vehicle maybe in the name of an entity FastFredRacing LLC? being used for personal use. Does this negate the protections under the LLC or the commercial policy?

[cabmandone]

^^^
Quick question: In a car accident case, they will list both the individual and the insurance company as defendant. So aren't they indeed suing the insurance company as well as the individual?