What's your view about liability insurance for risk management?

Generally, we are all for it. But you need enough insurance. Too little coverage will still expose you to a judgment in excess of your coverage. And a good plaintiff’s lawyer can manipulate a jury to make an outlandish award far beyond your policy limits.

You can’t predict what you can lose once you are sued. Years ago we could, with reasonable accuracy, predict the outcome of a lawsuit. Juries were sane. Judges cut excessive awards. Punitive damage claims that awarded a plaintiff millions for no damages were unheard of. That was then. The courts compensated actual losses. Not today. Courtrooms now redistribute wealth. You can’t be confident that your million-dollar policy is enough. No matter how much liability insurance you carry, some litigant will sue you for more.

Most cases do settle within the policy limits. But until that happens, you will anguish that possibly you will be hit with a judgment that will exceed your coverage. You will then lose your assets despite your insurance. You will also have to hire your own lawyer to defend yourself against your potential excess liability.

So how much liability insurance is enough? That’s a tough question to answer. If insurance were free, we would say to buy all you can. But insurance isn’t free. The more you buy the more you pay. You must then balance the cost of increased coverage against the risks from less coverage. You must not only consider the probability of an excess judgment against you but also what you could lose if you did face a judgment beyond your policy limits. Since you can never buy enough coverage to insulate yourself against today’s insatiable litigation demands, your only solution is to also protect yourself by means other than insurance.