Car Accident Asset Protection

What to Do if Someone Sues You for a Car Accident

Nobody ever expects to cause a car accident. But if you do, you may wonder what you should do if someone sues you after the car accident. Most lawsuits after car accidents are rare as long as your have car insurance. Most cases will settle for your insurance policy limit or less.

But sometimes car accident cases do end up turning into lawsuits when the injured person believes he will be able to collect more from you and your insurance carrier through litigation than through settlements. If you lose a car accident lawsuit, then the injured person will be able to obtain a monetary judgment against you and may seek to collect on any amount beyond your insurance policy limit. When this outcome is a possibility, it is best to protect your assets to avoid collection after the judgment and to improve your negotiating position during the settlement process.

How to Protect Your Assets After a Car Accident

To protect your assets after a car accident, you should take the following three steps:

1. Discuss with your insurance carrier whether the damages are likely to be at or under your policy limit.
2. Go through your assets and determine which assets are protected from collection should the injured person file a lawsuit against you.
3. For any assets that are not protected, implement a plan to protect those assets.

Having to protect assets after a car accident in Florida is something we never plan to do. While many people purchase the required level of insurance, they are often shocked that potential liability stemming from a car accident can far exceed their insurance levels. Protecting your assets involves taking advantage of the many protections provided by Florida statutes and common law.

Clients often ask us, “Can someone sue you for a car accident in Florida?” The answer is yes in more situations than you may think of. In Florida, you do not even need to have driven a vehicle involved in the car accident to face a potential monetary judgment. Under Florida law, both the at-fault driver and the owner of that vehicle can be sued for damages relating to the car accident.

How Often do Auto Accident Settlements Exceed the Policy Limits?

The vast majority of accident settlements do not exceed insurance policy limits. The reason for this is because how personal injury attorneys and law firms typically operate: their goal is usually to get the most amount of money for the least amount of effort possible. They want quick settlements, not protracted litigation.

In most cases, an injured person (through his attorney) will demand the full policy limit to settle the case, while asserting that his damages far exceed the policy limit. The threat to the insurance carrier, especially when limits are low, is that the cost of a legal defense and ultimate judgment will be more than the policy limit, so that is why they often will just settle.

When a claim settles for the policy limit or less, you typically will not experience any cost (other than a rise in insurance premiums).

Assets at Risk

If you are being sued for a car accident, you may be wondering, “What can they take?” Figuring out how to protect your assets after a car accident begins with understanding how the injured person would be able to collect should they sue and obtain a judgment against you. The most common collection tools are wage garnishments and bank account garnishments.

Wage Garnishment

Can your wages be garnished for an auto accident? Yes, with a wage garnishment, the judgment creditor will be able to seize up to 25% of your take-home pay (the amount after required deductions). With a bank account garnishment, the creditor may be able to seize whatever funds you have in your bank accounts.

Once a bank receives a garnishment from the car accident judgment creditor, the bank will be legally required to freeze the account. In most states, including Florida, the bank must then file a formal response which states the titling of your accounts and how much money was in the account at the time the bank was served with the garnishment documents.

However, there are exemptions to these creditor tools. First, if you legally qualify as head of family (also called head of household) under Florida law, then your wages may be exempt from garnishment. In addition, wages of a head-of-household that are deposited into a bank account may retain their exempt character for up to six months. More complicated is when wages are paid from an LLC or corporation owned by you. In addition, distributions of profit from your business may not qualify as protected wages.

In addition to the head of household exemption, there may be other defenses to assert against the garnishment, including those related to garnishment procedure and property ownership.

As to how the judgment creditor will find out where you bank or where you work, Florida law provides the creditor various tools.  For example, the creditor may examine nearly all of your financial documents, including bank records, tax returns, wage statements, and so on. In addition, the judgment creditor can take your deposition under oath and ask you about your finances. Some creditors are able to obtain your banking history from third-party sources. Therefore, trying to hide assets from the judgment creditor almost never works and is not a good strategy.

Financial Affidavit

Is a financial affidavit required for an auto accident? One of the first things that may happen after a car accident is that your insurance company may give you a financial affidavit to fill out. The insurance company will likely say that the affidavit comes from the injured’s person attorney, who seeks to know what assets your have. The financial affidavit helps the injured person decide whether or not to sue you for damages in excess of your insurance policy limits.

Unlike some other states, there is no law in Florida that requires you to fill out the affidavit. That being said, sometimes it is a good idea to fill it out; sometimes it is not. It depends on what you hope to achieve in sending the affidavit and how well you have implemented an asset protection plan. Often the best course is to review your asset protection status, fix any issues, and then perhaps send in the affidavit. It is never too late to protect your assets, even after the car accident occurs.

Engaging in an asset protection plan after a car accident is the process where you can structure your assets, including businesses, investments, and savings, to make it more difficult—if not impossible—for the injured person to collect on their judgment.  That difficulty can then give you leverage in settling the case with the injured person, either before or after the judgment is entered.

What to Do Next

You may wish to review your financial situation with an attorney to determine what assets are at risk of collection should the injured person decide to file a lawsuit against you. Fortunately, we are able to help most clients protect any exposed assets so that, even in a worst-case scenario, their family income and assets are protected against a potential creditor.