Interplay of Insurance and Asset Protection

Asset protection planners invariably deal with insurance and discuss its place in the asset protection plan. No legitimate asset protection planner, irrespective of the elegance of the plan he or she may have conceived, will advise a client to forego obtaining and maintaining auto insurance, home insurance or malpractice insurance coverage. There is no such thing as establishing a structure that is one hundred percent invulnerable to creditor claims; therefore, having liability insurance as the first level of defense just makes good sense. It is in this context that I am going to discuss whether consumers are adequately represented by their insurance agents. And why it is so important for consumers to thoroughly investigate their insurance needs and the products offered to satisfy those needs.

I was at a dinner party recently discussing how a couple had failed to obtain workers compensation coverage for a full-time nanny. When the nanny incurred an injury on the job the couple contacted their insurance agent to report the potential claim. Only at that point did the agent inform the couple that the homeowner’s policy excluded coverage for workers compensation claims. The policyholders discovered to their horror that they had no coverage. One of the guests present then asked whether the insurance agent should have some liability for failing to advise his clients about the need to obtain workers compensation coverage.

In a 1999 case, Harts v. Farmers Ins. Exchange, the Michigan Supreme Court stated that an insurance agent generally has no duty to advise insureds about the adequacy of coverage. Unless there is a special situation (such as, for example, where the agent misrepresents the nature or extent of the coverage or the agent gives inaccurate advice or the agent affirmatively assumes a greater duty) the insurance agent is a mere order-taker. Apparently there is a category of persons licensed by the State who are designated as insurance counselors. They must pass a more rigorous program than an insurance agent however, once licensed, have a duty to advise insureds who retain them. But the typical insurance producer does not. Therefore, an insured must exercise her own due diligence to confirm that she is obtaining the coverage needed…whether it be home, auto, boat, business or otherwise. Indeed, perhaps more insureds should be dealing with insurance counselors recognizing it may be a fee for service arrangement…but in the end one well worth it.

While this blog deals with liability protection it should also be mentioned that it is up to the insured to determine whether items of jewelry, art and other valuables are separately endorsed. Failure to do so will result in only token coverage.