Personal liability insurance in retirement

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paulsiu
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Personal liability insurance in retirement

Post by paulsiu » Mon Jan 14, 2013 9:16 pm

Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul

freebeer
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Re: Personal liability insurance in retirement

Post by freebeer » Mon Jan 14, 2013 9:53 pm

paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul
The chances of a large accident leading to a major liability claim against a retired individual of modest means, that would not be covered by standard auto insurance, are extremely small. With $500K net worth your challenge in retirement is making your assets last, spending extra to insure against this low probability would likely increase your odds of going broke by orders of magnitude more... I don't have any hard data here, just saying.

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DiscoBunny1979
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Re: Personal liability insurance in retirement

Post by DiscoBunny1979 » Mon Jan 14, 2013 10:04 pm

The complete answer probably is determined by the state you live in as to what is protected. However, Federally most retirement plans, IRAs are protected from lawsuits. This was made more publically known when OJ Simpson was found guilty in civil court, but collection could not touch his Pension - only real physical assets, like the grand piano, real estate, trophy, etc. In terms of real estate, if in a state like California that has a Homestead exemption, $100,000 can be protected from creditors/law suits because of such exemption. So, not all assets can be attached, but some can be. That's why the Goldmans and whoever else sued OJ Simpson may never really see most of the money the court awarded them. There was no motivation for OJ Simpson to make more money than he had earned from his Pension. So, the debt will remain in tact for as long as the award is good for. And OJ gets to keep his Pension, unless that goes away due to his recent 'conviction'.....which some Pensions, like some LTD plans have a clause (very small print) that requires the recipient to not be convicted of a felony when collecting benefits or benefits stop.

paulsiu
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Re: Personal liability insurance in retirement

Post by paulsiu » Mon Jan 14, 2013 11:17 pm

State will be in CA, but since she does not own a home, the homestead will not apply.

In CA, 401K are protected from lawsuits but IRA are only protected if it is deemed necessary for retirement. I am not sure what the criteria is.

Auto insurance is currently set at 250/500K, so I was wondering if a $1 million umbrella would be an overkill.

Paul

mrpotatoheadsays
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Re: Personal liability insurance in retirement

Post by mrpotatoheadsays » Tue Jan 15, 2013 12:04 am

paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul
Your personal umbrella policy should cover your net worth. If I trip over your foot and hurt myself, I will sue you.

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damjam
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Re: Personal liability insurance in retirement

Post by damjam » Tue Jan 15, 2013 12:12 am

I'm curious what happens if your umbrella policy is for 1 million and your net worth is also 1 million. Now you are sued for 3 million and the injured party wins the full 3 million. Doesn't the insurance pay 1 million, then 1 million is taken from you and your future earnings garnished for the remaining 1 million?
Or does it work some other way.

freebeer
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Re: Personal liability insurance in retirement

Post by freebeer » Tue Jan 15, 2013 12:17 am

mrpotatoheadsays wrote:
paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul
Your personal umbrella policy should cover your net worth. If I trip over your foot and hurt myself, I will sue you.
How many tort suits a year for trip-and-falls are even filed much less won against private individuals for injuries outside homes? (presumably OP has homeowners/renters insurance)? I dunno but I'm sure a tiny number... you might at well recommend special insurance against being struck by lightning. I find it funny/sad that so many Bogleheads seem to try to guard against miniscule risks in retirement years when the biggest risk we all face... by far... is dying. Maybe it's the (futile) desire to be in control of the future? Second biggest risk is running out of money and spending too much which spend on unnecessary insurance doesn't help there (although it does line the pockets of insurance agents and companies).

damjam: most umbrella insurance policies require you to have auto and homeowners and only cover additional amounts of judgments not covered by these base policies. So $1M umbrella might really only cover an extra $750K in most situations if it requires $250K of these coverages. And in reality very seldom will a lawsuit go beyond the base policy so payouts are rare. I'd suppose umbrella policies are the most profitable policies since they are often sold as add-ons, less often shopped around, and to the worryworts who probably aren't as cost-sensitive.

trudy
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Re: Personal liability insurance in retirement

Post by trudy » Tue Jan 15, 2013 6:45 am

I have $5,000,000 in liability insurance. It costs me about $500 a year. It covers the house, car, etc.

I realize I am unlikely to need this, but I like to sleep at night, and as a retired person, I would have no way of replacing my assets if I had a large liability problem.

I think I would be a target because I live in a waterfront house which spells MONEY to anyone looking at it. I see contractors' eye light up with dollar signs when they arrive for estimates or repair work. I do not actually have MONEY. I own the house because it's a family house my grandfather bought about a century ago. I actually have to scrape to make the confiscatory property tax payments.

I would like to understand better what assets are actually protected from liability claims. I see conflicting answers to the post about if IRAs are protected.

I should add, for whatever this is worth, both my cousin and my brother are relatively well to do. Their separate financial planners told them, $5,000,000.

Call_Me_Op
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Re: Personal liability insurance in retirement

Post by Call_Me_Op » Tue Jan 15, 2013 7:04 am

paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul
Depends upon what you have in unprotected assets. Retirement accounts are protected as are most pensions. It sounds to me like you don't have to worry, but umbrella is cheap so you might want to pick-up a million for peace of mind.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Call_Me_Op
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Re: Personal liability insurance in retirement

Post by Call_Me_Op » Tue Jan 15, 2013 7:07 am

damjam wrote:I'm curious what happens if your umbrella policy is for 1 million and your net worth is also 1 million. Now you are sued for 3 million and the injured party wins the full 3 million. Doesn't the insurance pay 1 million, then 1 million is taken from you and your future earnings garnished for the remaining 1 million?
Or does it work some other way.
There have been several threads on this. If you have 1 million in unprotected assets, you should have at least 2 million in umbrella. Why? Because you want to give the plaintiff's lawyer enough to go away - to decide that it's not worth the tougher fight to get-at your personal assets.
Last edited by Call_Me_Op on Tue Jan 15, 2013 7:15 am, edited 1 time in total.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Quasimodo
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Re: Personal liability insurance in retirement

Post by Quasimodo » Tue Jan 15, 2013 7:15 am

Hi Paul;

We're retired with a lot less than $500k in savings and still carry a $1MM umbrella policy. Part of my rationale is that the policy provides coverage for defense costs against even a frivolous lawsuit, something my wife and I would have trouble paying for.

We drive a car, so an accident with serious injuries to someone is a meaningful possibility. The umbrella costs $105 a year. In the context of operating a car, that isn't a noticeable expense even for people of modest means like us. I don't mean to imply that a higher premium might mean the coverage isn't worth it. A higher premium would probably mean a more significant exposure to lawsuits in some way, such as multiple cars or being located in a large metro area, or a variety of other liability issues.

I sincerely hope we never have an accident or get sued and our premium goes to pay someone else's claim. The umbrella is still worth it to me for peace of mind.

Good luck, whatever you decide.

John
Many wealthy people are little more than janitors of their possessions. | | Frank Lloyd Wright, architect (1867-1959)

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tadamsmar
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Re: Personal liability insurance in retirement

Post by tadamsmar » Tue Jan 15, 2013 9:14 am

Just having a umbrella policy has helped me monitor and control my liability risk. I realized a canoe that I had loaned out and never used needed a liability insurance policy, so I got rid of it. I found that just co-signing on my daughter and son-in-law's home loan got me a letter from the umbrella insurance carrier telling me I needed to add this to my policy checklist and make sure they had sufficient homeowner's liability insurance. It's plausible that just this monitoring is worth as much as the premium. I have a policy with RLI.

Grt2bOutdoors
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Re: Personal liability insurance in retirement

Post by Grt2bOutdoors » Tue Jan 15, 2013 9:31 am

Call_Me_Op wrote:
damjam wrote:I'm curious what happens if your umbrella policy is for 1 million and your net worth is also 1 million. Now you are sued for 3 million and the injured party wins the full 3 million. Doesn't the insurance pay 1 million, then 1 million is taken from you and your future earnings garnished for the remaining 1 million?
Or does it work some other way.
There have been several threads on this. If you have 1 million in unprotected assets, you should have at least 2 million in umbrella. Why? Because you want to give the plaintiff's lawyer enough to go away - to decide that it's not worth the tougher fight to get-at your personal assets.
It's not your call to have the plaintiff's lawyer to go away - it's the insurance companies call and believe me, they want to keep every cent they can.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Personal liability insurance in retirement

Post by Grt2bOutdoors » Tue Jan 15, 2013 9:37 am

paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your assets?

Paul
Let me give you a real life scenario where having a personal umbrella policy provided peace of mind. Several years ago, my father was at work and had legally parked his vehicle (as opposed to double parking it), it was flurrying outside making the street a bit slick, a van had stopped quickly to avoid running a red light, a taxicab behind the van could not stop in time and was carrying a passenger in the back seat. The taxicab hit the van and then tapped my father's car causing damage to it. The police wrote down on the accident report there were 3 cars involved in the accident. The passenger obtained a personal injury attorney claiming she wretched her neck which required physical therapy and the wearing of a neck brace. The attorney sued the taxicab company, the driver of the van and my father for $1MM. Now, the insurance company representing my father went through the facts, spoke with my father and then proceeded to tie up the case for 6 months before having it thrown out on frivolous claims. But for 6 months, we had to think about what could happen if we lost (losing our home! - we had no other assets) and worse, what could have happened had we not had that policy.

Pennywise - don't be pound foolish.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

BogleLearner
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Re: Personal liability insurance in retirement

Post by BogleLearner » Thu Jul 13, 2017 11:14 am

trudy wrote:I have $5,000,000 in liability insurance. It costs me about $500 a year. It covers the house, car, etc.

I realize I am unlikely to need this, but I like to sleep at night, and as a retired person, I would have no way of replacing my assets if I had a large liability problem.

I think I would be a target because I live in a waterfront house which spells MONEY to anyone looking at it. I see contractors' eye light up with dollar signs when they arrive for estimates or repair work. I do not actually have MONEY. I own the house because it's a family house my grandfather bought about a century ago. I actually have to scrape to make the confiscatory property tax payments.

I would like to understand better what assets are actually protected from liability claims. I see conflicting answers to the post about if IRAs are protected.

I should add, for whatever this is worth, both my cousin and my brother are relatively well to do. Their separate financial planners told them, $5,000,000.
I am curious what insurance company covers you for a 5,000,000 umbrella policy, included with house and car. My insurance company premiums are much higher then $500 for less coverage (2 mil). Thank you

kmurp
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Re: Personal liability insurance in retirement

Post by kmurp » Thu Jul 13, 2017 6:07 pm

That is a great rate for 5 mill. I pay that much for 1million.

abner kravitz
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Re: Personal liability insurance in retirement

Post by abner kravitz » Thu Jul 13, 2017 7:44 pm

trudy wrote: I would like to understand better what assets are actually protected from liability claims. I see conflicting answers to the post about if IRAs are protected.
I am not a lawyer, but my understanding is that the protection of IRA assets varies by State. 401K plans, on the other hand, are protected under Federal laws (ERISA)

ResearchMed
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Re: Personal liability insurance in retirement

Post by ResearchMed » Thu Jul 13, 2017 8:05 pm

Grt2bOutdoors wrote:
paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your assets?

Paul
Let me give you a real life scenario where having a personal umbrella policy provided peace of mind. Several years ago, my father was at work and had legally parked his vehicle (as opposed to double parking it), it was flurrying outside making the street a bit slick, a van had stopped quickly to avoid running a red light, a taxicab behind the van could not stop in time and was carrying a passenger in the back seat. The taxicab hit the van and then tapped my father's car causing damage to it. The police wrote down on the accident report there were 3 cars involved in the accident. The passenger obtained a personal injury attorney claiming she wretched her neck which required physical therapy and the wearing of a neck brace. The attorney sued the taxicab company, the driver of the van and my father for $1MM. Now, the insurance company representing my father went through the facts, spoke with my father and then proceeded to tie up the case for 6 months before having it thrown out on frivolous claims. But for 6 months, we had to think about what could happen if we lost (losing our home! - we had no other assets) and worse, what could have happened had we not had that policy.

Pennywise - don't be pound foolish.
Thanks for this.

It's quite an example of how one wants that liability coverage in case someone sues you in a case you'd almost be guaranteed not to lose.
... but you'd need to pay the legal bills to avoid it.

It's sort of amazing that it took so long to get that tossed.
But that's a testament to how "dedicated" some plaintiff's attorneys can be.

RM
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TravelforFun
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Re: Personal liability insurance in retirement

Post by TravelforFun » Thu Jul 13, 2017 9:52 pm

BogleLearner wrote:
trudy wrote:I have $5,000,000 in liability insurance. It costs me about $500 a year. It covers the house, car, etc.
.
I am curious what insurance company covers you for a 5,000,000 umbrella policy, included with house and car. My insurance company premiums are much higher then $500 for less coverage (2 mil). Thank you
Trudy, that's a great rate! I pay Geico $287 a year for $1 million umbrella coverage in addition to the premium I pay them for my home and automobile coverage. What company are you using?

OnTrack
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Re: Personal liability insurance in retirement

Post by OnTrack » Fri Jul 14, 2017 12:01 am

freebeer wrote:
mrpotatoheadsays wrote:
paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your asses?

Paul
Your personal umbrella policy should cover your net worth. If I trip over your foot and hurt myself, I will sue you.
How many tort suits a year for trip-and-falls are even filed much less won against private individuals for injuries outside homes? (presumably OP has homeowners/renters insurance)? I dunno but I'm sure a tiny number... you might at well recommend special insurance against being struck by lightning. I find it funny/sad that so many Bogleheads seem to try to guard against miniscule risks in retirement years when the biggest risk we all face... by far... is dying. Maybe it's the (futile) desire to be in control of the future? Second biggest risk is running out of money and spending too much which spend on unnecessary insurance doesn't help there (although it does line the pockets of insurance agents and companies).

damjam: most umbrella insurance policies require you to have auto and homeowners and only cover additional amounts of judgments not covered by these base policies. So $1M umbrella might really only cover an extra $750K in most situations if it requires $250K of these coverages. And in reality very seldom will a lawsuit go beyond the base policy so payouts are rare. I'd suppose umbrella policies are the most profitable policies since they are often sold as add-ons, less often shopped around, and to the worryworts who probably aren't as cost-sensitive.
I believe most umbrella policies extend coverage beyond the required auto and homeowner's policies. So in the case of an auto accident, if the auto policy covered $250,000 and the umbrella policy covered $1M, then the total coverage would be $1,250,000.

barreg
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Re: Personal liability insurance in retirement

Post by barreg » Fri Jul 14, 2017 4:35 pm

Grt2bOutdoors wrote:
paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your assets?

Paul
Let me give you a real life scenario where having a personal umbrella policy provided peace of mind. Several years ago, my father was at work and had legally parked his vehicle (as opposed to double parking it), it was flurrying outside making the street a bit slick, a van had stopped quickly to avoid running a red light, a taxicab behind the van could not stop in time and was carrying a passenger in the back seat. The taxicab hit the van and then tapped my father's car causing damage to it. The police wrote down on the accident report there were 3 cars involved in the accident. The passenger obtained a personal injury attorney claiming she wretched her neck which required physical therapy and the wearing of a neck brace. The attorney sued the taxicab company, the driver of the van and my father for $1MM. Now, the insurance company representing my father went through the facts, spoke with my father and then proceeded to tie up the case for 6 months before having it thrown out on frivolous claims. But for 6 months, we had to think about what could happen if we lost (losing our home! - we had no other assets) and worse, what could have happened had we not had that policy.

Pennywise - don't be pound foolish.
Wouldn't the outcome likely have been the same if your father just had liability insurance on his car and didn't have an umbrella policy? It seems like either way, the insurance company would have worked to get the lawsuit thrown out.

ralph124cf
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Re: Personal liability insurance in retirement

Post by ralph124cf » Fri Jul 14, 2017 5:58 pm

barreg wrote:
Grt2bOutdoors wrote:
paulsiu wrote:Suppose you have roughly $500K in retirement, your income is asset alone + your SS and a Pension. How much liability do you carry.

Now suppose you cause a large accident like running into a bus and causing injury to everyone on board. If they win, do they garnish your SS and pension and seize all of your assets?

Paul
Let me give you a real life scenario where having a personal umbrella policy provided peace of mind. Several years ago, my father was at work and had legally parked his vehicle (as opposed to double parking it), it was flurrying outside making the street a bit slick, a van had stopped quickly to avoid running a red light, a taxicab behind the van could not stop in time and was carrying a passenger in the back seat. The taxicab hit the van and then tapped my father's car causing damage to it. The police wrote down on the accident report there were 3 cars involved in the accident. The passenger obtained a personal injury attorney claiming she wretched her neck which required physical therapy and the wearing of a neck brace. The attorney sued the taxicab company, the driver of the van and my father for $1MM. Now, the insurance company representing my father went through the facts, spoke with my father and then proceeded to tie up the case for 6 months before having it thrown out on frivolous claims. But for 6 months, we had to think about what could happen if we lost (losing our home! - we had no other assets) and worse, what could have happened had we not had that policy.

Pennywise - don't be pound foolish.
Wouldn't the outcome likely have been the same if your father just had liability insurance on his car and didn't have an umbrella policy? It seems like either way, the insurance company would have worked to get the lawsuit thrown out.
It is true that the primary insurer will fight this, but still, the umbrella insurer has more at stake. I have no idea how the companies split the legal bills.

Bryan

afan
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Re: Personal liability insurance in retirement

Post by afan » Fri Jul 14, 2017 7:01 pm

Important for retirees to remember: the asset protection for 401(k), IRA and similar plans applies only while the money is in the plan. Once you take it out, as you must if you want to spend it, the protection goes away. When you cross age 70 you have to take money out, even if you don't need it to spend.

For people in retirement the plan balance is protected but the withdrawals are exposed.

One of the important things the.insurance buys you is representation by a competent attorney. If I were sued I would have no idea who to hire. But my insurance company deals with liability suits all the time and would hire people who knew what they are doing.

The legal.fees to make a case go away with no settlement and no trial would almost certainly be much higher than a.lifetime of umbrella policy premiums.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Grt2bOutdoors
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Re: Personal liability insurance in retirement

Post by Grt2bOutdoors » Fri Jul 14, 2017 7:52 pm

barreg wrote:
Wouldn't the outcome likely have been the same if your father just had liability insurance on his car and didn't have an umbrella policy? It seems like either way, the insurance company would have worked to get the lawsuit thrown out.
You don't know the outcome from the onset (hindsight is 20/20) and never undervalue peace of mind and your sleep at night. Sure, the insurance company would have worked to get it thrown out, but those with deeper pockets (umbrella insurer) will be incentivised even more.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

ResearchMed
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Re: Personal liability insurance in retirement

Post by ResearchMed » Fri Jul 14, 2017 8:09 pm

Grt2bOutdoors wrote:
barreg wrote:
Wouldn't the outcome likely have been the same if your father just had liability insurance on his car and didn't have an umbrella policy? It seems like either way, the insurance company would have worked to get the lawsuit thrown out.
You don't know the outcome from the onset (hindsight is 20/20) and never undervalue peace of mind and your sleep at night. Sure, the insurance company would have worked to get it thrown out, but those with deeper pockets (umbrella insurer) will be incentivised even more.
Also, this could have been something even a bit more strange, not involving the car, which does have its "own" insurance.

People can sue for all sorts of things, real or imagined, good grounds or none.

The umbrella covers it all, unless there are exclusions (such as boats or business, etc., in which case a separate policy would be needed).

Yes, sleep well at night!
This is a good example of very low risk, very high cost... and the coverage is priced accordingly.

RM
This signature is a placebo. You are in the control group.

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