As a small business owner, I occasionally find myself wondering what I would do if one of my customers ever sued me. And what if I lost a lawsuit to the tune of several million dollars? I need to assume my business insurance would cover it. If not, I don’t know how I could ever make good on the debt.
I was recently reminded of this reality by a civil lawsuit decided in Michigan. The case revolved around a 2020 dam failure and the devastating flooding that followed. The Michigan Department of Environment, Great Lakes, and Energy sued the owner of the dam and several of his companies in conjunction with the state Department of Natural Resources. They won and the state was awarded $119.8 million. How does one pay that kind of award, exactly?
Insurance Probably Has a Role
The news report I read on this lawsuit was short on details, so I don’t know how many companies are involved here. I just know that the owner and several of his companies were found liable for the dam collapse. I need to assume that shared liability means all of them will have to contribute something.
I also suspect that their liability insurance will play a role in settling up. After all, that’s what liability insurance is for. But do the companies have a deductible? And if so, how much will their cumulative payments amount to? And what if they fail to pay?
These are the types of things I think about when I read stories like this. I am not the kind of person who flips the page and moves on. I am endlessly curious. I want to know the details and the future outcome. Needless to say that I will be paying attention to how this plays out.
Enforcing the Judgment
I can envision a small business like mine being hit with a judgment of $10K-$50K. I have no problem imagining my liability insurance covering the debt. But I cannot imagine an award in excess of $119 million. If I could not pay a $50K judgment, the judgment creditor would likely send his attorney or a collection agency after me. But would either be effective in settling a debt as large as the one just awarded the state of Michigan?
Thinking about this, I understand that enforcing judgments is a tricky business. Companies like Judgment Collectors, out of Salt Lake City, exist because enforcing judgments is rarely easy. I need to imagine that judgments get harder to enforce the larger they are. But then again, there is always the liability insurance thing to consider.
Big Companies Have Big Insurance
Big companies tend to have big insurance policies. Your typical multibillion dollar corporation carries enough insurance to cover anything in everything. So if the companies involved in the Michigan lawsuit have that kind of protection, ponying up in excess of $119 million might not be a big deal. I’m not so lucky.
What if someone slipped outside my office and broke a hip? What if that person was elderly and ultimately died in the hospital? I could get sued for millions. My liability insurance would not cover that amount. On the one hand, I could protect myself by beefing up my insurance policy. On the other hand, I cannot afford to do so.
I shudder at the thought of being slapped with a lawsuit worth hundreds of millions of dollars. Here’s hoping it never happens. If it does and I lose, the chances are pretty good that the judgment creditor will never get paid.