By Larry Oxenham, Senior Advisor, American Society for Asset Protection

Concrete contractors operate in one of the highest-risk segments of the construction industry. Among heavy equipment, jobsite hazards, employees, vehicles and the public, the potential for lawsuits is constant. One accident, defect claim or employment dispute can quickly escalate into a legal battle that threatens not only your business, but your personal wealth as well.

Understanding how lawsuits work and how to reduce your exposure is the first step toward protecting everything you’ve built. While insurance is essential, it is not enough on its own. A strong asset protection strategy, including properly structured LLCs, can make the difference between a manageable situation and financial devastation.

STEP 1. INJURY OR LOSS

Every lawsuit begins with some form of injury or financial loss. For concrete contractors, this can stem from a wide range of situations. A worker may be injured on a jobsite, a pedestrian could trip on freshly poured or uneven concrete or a structural failure may cause property damage. Vehicle accidents involving company trucks or equipment are another common source of claims. In addition, contractors can face employment-related lawsuits such as wrongful termination, discrimination or harassment. Because concrete work often involves public exposure and long-term structural performance, even a small issue can evolve into a significant legal claim.

STEP 2. FIND A DEFENDANT(S) WHO CAN PAY

Most lawsuits are handled on a contingency basis, meaning the attorney only gets paid if they recover money. Because of this, one of the first steps an attorney takes is determining whether a potential defendant has assets worth pursuing. In many cases, individuals and businesses are targeted not because they are clearly at fault, but because they have the ability to pay.

To ensure your business and personal assets are not subject to seizure, you want to hold them in multiple LLCs (limited liability companies). With your assets in properly drafted and funded LLCs, they are no longer owned by you or the business but are owned by a separate legal entity, and the attorney’s asset search will find no assets that can be taken through a lawsuit.

STEP 3. CONSTRUCT A THEORY OF LIABILITY

If the person immediately responsible for the loss or injury does not have the ability to pay, the attorney will likely search for a deep-pocketed defendant and a theory of liability that can be developed against him or her, showing why that defendant should be held responsible. The success of the trial attorney is dependent on this. Trial attorneys comprise one of the largest lobbyist groups in the country and have created laws to increase the level of vicarious liability. Vicarious liability means you can be held responsible for the actions of others. Trial attorneys have worked hard to ensure that whoever has the money can be held responsible for negative outcomes through vicarious liability, even if they committed no wrong. One example of this is premise liability. Premise liability is a law that was lobbied for by trial attorneys. This law states that the owner of a property is responsible for any injury or loss that occurs on that property. This is why you see lawsuits where a homeowner is held responsible when a burglar is injured while robbing a home. The homeowner did nothing wrong. The burglar was trespassing and stealing, but by law the homeowner is still responsible if the burglar is hurt while on their property.

STEP 4. TRIAL

Every day we see trial attorneys winning cases that appear to be irrational, absurd and without merit. Many attorneys will even pursue a bad case if they can find a defendant with the ability to pay. They hope they can obtain a settlement or convince the jury to award cash to the injured plaintiff from the comparatively wealthy defendant. Many jurors have freely admitted that they have overlooked whether the defendant was at fault if they felt sorry for the plaintiff.

STEP 5. JUDGMENT

If the plaintiff (person filing the lawsuit) wins the trial and the defendant (the person they are suing) is found responsible for the injury or loss, the court renders a judgment to compensate the plaintiff for their injury and/or loss. It is now routine for judgments to be millions of dollars.

STEP 6. COLLECT ON JUDGMENT

A judgment only has value if it can be collected. This is why attorneys focus so heavily on identifying defendants with reachable assets. If your assets are held in your personal name or directly within your operating business, they may be seized to satisfy the judgment.

However, when assets are properly structured within separate LLCs, they are significantly more difficult to access. In many cases, if there are no reachable assets beyond insurance coverage, the incentive to pursue or continue a lawsuit is greatly reduced.

SETTLEMENT

Anytime during the lawsuit process, you can come to a settlement to end the lawsuit. If a lawsuit falls under items covered by your insurance company, they will cover the cost of your defense. The insurance company will often settle to avoid the high cost of the case going to trial. If your business or personal assets are protected from being seized to satisfy a judgment, the person suing is also more likely to settle with the insurance company than go for a large judgment that could excess your insurance coverage because there are no assets to seize to satisfy a judgment in excess of your insurance coverage.

While we recommend you have reasonable insurance coverage, it is impossible to have insurance that covers all potential lawsuits and judgments. Insurance companies are good at drafting exclusions in their policies to minimize their risk. If you are sued for something that is not covered by your insurance such as sexual harassment, discrimination or violations of Americans with Disabilities Act, you will have to defend yourself. Also, your business and/or personal assets could be seized to satisfy a judgment in excess of your insurance coverage if they are not properly held in LLCs.

LAWSUIT PREVENTION AND ASSET PROTECTION

If you are personally named in the lawsuit, all assets held in your name or in joint ownership can be seized to satisfy the judgment. If your business is sued, all assets held by the business can be seized to satisfy the judgment. To solve this problem, you want to hold your business and personal assets in carefully constructed and properly worded LLCs. The best way to defend against a lawsuit is to take away the financial incentive of attorneys to prevent the lawsuit from ever happening. If you have no reachable and seizable assets, the trial attorney’s strategies of legal extortion will not be effective against you. With proper asset protection in place, attorneys will not want to pursue a lawsuit against you. Larry Oxenham leads seminars on asset protection for business owners throughout America. For information please go to americansocietyforassetprotection.com.