By Tripp Wiles, Attorney and Counselor at Law, Wiles Law Firm, LLC 843-718-0232, www.wileslawfirm.com
“My teenage son is being blamed for an accident he did not cause, and I have been notified that the injured is coming after me and my assets…”
“My grandson borrowed my car and was in a minor fender bender. The other party is claiming they need neck surgery. I am concerned because my home is paid off. Is it protected?”
These are the calls I hate to receive, but I can assure you they are becoming the norm.
Here in South Carolina, we are bombarded by this issue anytime we drive or turn on the TV. Charleston highways are lined with billboards imploring you to call a 1-800 number if you or a loved one have been injured in a car wreck. The local airwaves and TV commercials are filled with these requests as well. Why?
Citing high plaintiff awards in 2021, the American Tort Reform Foundation named South Carolina’s local court and state judicial system the 4th worst in the country.
To help businesses decide where to operate, the US Chamber of Commerce’s Institute for Legal Reform publishes an annual list of favorable legal jurisdictions. Over the last decade, South Carolina has consistently ranked at the bottom.
In a February 2023 article, The Cato Institute posits that the biggest crime in SC is South Carolina’s litigation friendly system. Published South Carolina settlements and awards support these rankings:
- Pedestrian struck by vehicle settles for 10 million.
- $5 million award for pool injury victim.
According to the Post and Courier, these awards are having major effects on all SC residents. In a recent article, the paper cites the following fallout of high awards:
- Auto insurance premiums have gone up by 47% in 2023 for SC residents
- Charleston Restaurants and Bars are closing because they cannot pay new liability rates, which have risen because of plaintiff injury payouts.
To make matters worse, our state laws provide very little in the way protection. Compare Florida’s homestead exemption which allows for 100% equity protection of your personal residence. South Carolina affords you only $50K (adjusted for inflation) equity protection. South Carolina residents only have a few thousand dollars’ worth of protection for cash and taxable investments.
What can you do to prepare for the potential over-the-top claim?
There are a few options. Umbrella policies are an excellent first step but are not guaranteed to pay out. This is why we recommend a full analysis of your situation and the options.
Out of state or “foreign” LLCs are one of the options we use for many of our clients. In the right situation, “foreign” LLCs can be a powerful tool. South Carolina LLCs have been pierced by our state Supreme Court, and our legislature has not been proactive in fixing this problem.
In the recent update of the South Carolina Bar’s LLC treatise (South Carolina Limited Liability Companies-5th edition), the commentators make it clear that:
SC courts have deferred to out of state law to determine if the creditor can gain access to a foreign LLC’s assets: “(SC) Courts almost universally apply the law where the LLC is organized to determine if the veil should be pierced.”
South Carolina legal scholars recommend using out of state LLCs rather than SC LLCs.
Bottom Line: We live in a state that allows for high plaintiff awards and provides very little in the way of protection opportunities. If you want to position your assets for maximum leverage in the event of trouble, you need to have a plan.
If you are concerned about your protection strategy, I would highly encourage to consider sitting down with us in the new year to discuss your plan. What have you got to lose? Unfortunately, in South Carolina, it could be a lot.
