LLC In Lieu Of Liability Insurance?
If you haven't noticed, insurance companies are not only increasing premiums for liability, they are also starting to add more exclusions such as for mold and lead paint. Since any exclusion simply opens up a big hole to get sued through I have been wondering if any REI's have started doing what some builders have been forced to do. Some will actually skip the liability insurance and simply do LLC's, even to the point of forming one for each individual building project. What would be the drawback doing this? I'm so acccustomed to having insurance that the thought of not having it would seem dangerous, but on the otherhand, exclusions are the same thing as not having insurance.
Do the LLC for the "gaps", but buy the insurance for the "normal" exposures such as slips & falls, etc... Self insure the property to a certain extent by carrying higher property deductiblees.
You don't want the defense costs of a "smaller" claim forcing you to scramble to protect what is in the LLC...
I have not seen policies that write for separate liabilities. Maybe some one like lloyds of london does.
The other :legal insurance" is to have a lawyer as a partner.
Scottsdale is one company that sells a seperate liability policy.
The premium differnece between 300k and 2 milion with one of our carriers is $40 a year or so... I'd get the 2 mill...
Having an attorney as a partner would be a bonus, but won't keep you from getting sued...
I think you are getting your insurance coverages confused. Liability coverage on a homeowners policy pays for protection against any thing you do that could be considered negligent. Homeowner's liability has nothing to do with mold or lead paint. The exclusions you are referring to pertain to your dwelling coverage. They simply mean you cannot submit a claim for lead based paint repair or mold remediation. If someone sues you claiming they becam sick because of the presence of one of these items in your house, the liability insurance would afftord you protection. There may be differences since insurance is regulated by each state, but liability insurance is usually consistent. .
The end result is to get a Commercial Liability Umbrella Policy (CLUP) if you are buying properties in an LLC, S corp etc and a Personal Liability Insurance Policy if buying properties in your own name. They are extremely inexpensive compared to the coverage you get and they are called Umbrella policies because they cover any/all liability except if you are doing something illegal (selling drugs, robbing a bank) as opposed to negligent. If you sell a property and then get sued because you didn't disclose an easement that you knew about, there would be protection from the umbrella policy, but not the homeowners policy. It's a fine line, but one insurance companies know all to well. If you are in the business of buying and selling properties, buy the protection ...