Asset Growth Is Outpacing Personal Liability Protection.

Personal liability protection isn't keeping pace with growth in personal assets or litigation trends, leaving affluent individuals and their families exposed to the financial consequences of lawsuits, according to a survey by Chubb Corp.

The survey, completed by 266 U.S. households with annual incomes of more than $100,000, found that 88% of the households had seen an increase in their personal wealth during the past two years. Almost one third--30%--reported increases greater than 50%.

Despite the fact that nearly three-quarters--71%--of respondents said they regularly assess the adequacy of their insurance protection, nearly two-thirds--63%--admitted that their excess liability, or umbrella, limits haven't kept pace with the growth in their assets.

Meanwhile, jury awards have continued to increase in size. According to Jury Verdict Research, the average award of $1,004,308 in 1999, the latest year for which data has been compiled, was 240% higher than in 1994, when it was $418,478. The average award amount was driven up by an increased number of single awards (14%) worth more than $1 million.

In vehicular accident cases, the average award during this recent five-year period climbed from $75,127 to $315,653, while in personal negligence cases, the average award skyrocketed from $264,765 to $2,959,047. These figures exclude defense costs, which can run well into the hundreds of thousands of dollars, even when the defendant wins in court, Chubb noted.

"Despite advice from insurance agents, financial planners and noted personal finance columnists, consumers often don't purchase liability coverage beyond the limits of their homeowners policy," said Edward J. Fernandez, senior vice president and man aging director with Chubb Personal Insurance, in a statement. "For a relatively small premium, consumers and their families can be protected financially if they are sued when someone is injured on their property, in an automobile accident, or if they are accused of libel or slander."

What adults--or their children--say on the Internet also can carry significant exposure to liability, according to Chubb. For example, Fernandez noted that a couple recently incurred $750,000 in settlement and legal expenses when a jury held them responsible for defamatory remarks about teachers that their 14-year-old son had posted on a password-protected Web page.

Eighty-six percent of Chubb's survey respondents are concerned about the legal liability they face in today's environment. Sixty-two percent believe that personal excess liability coverage provides protection against legal liability. Yet about 25% of the respondents don't purchase the coverage because they don't see the need for it, thinking that homeowners insurance adequately covers their exposures. Nearly one-third--30%--carry less than $1 million in liability coverage, while 36% have $2 million or more in coverage.

Those who receive advice from an insurance agent or broker are more likely than those who don't to carry personal excess liability insurance. Those who adjust their excess liability levels at the same pace as their growth in assets tend to serve on the board of a charity or homeowners association and engage in multiple forms of asset protection, such as portfolio diversification, financial planning and life insurance purchasing, among other attributes, according to Chubb, which provides personal and commercial property/casualty insurance.

"This situation provides a significant opportunity for agents and brokers to recommend more and higher limits to adequately cover their customers' exposure to risk," Fernandez said.