Bankruptcy and Insurance

It is very rare that a person files for bankruptcy because of a dog attack. However, it does happen if the liable person either is not insured or does not have assets sufficient to pay the uninsured portion of the judgment (i.e., if the insurance limit is $100,000 and the verdict is for $500,000, then the uninsured portion is $400,000). Bankruptcy results in a complete discharge of the uninsured portion of the debt to the dog bite victim, except in extremely rare cases where the dog owner willfully caused the attack to happen.

Because of the possibility of complete discharge, it is of the utmost importance to determine whether the liable party or parties are insured. If a defendant is insured, he or she does not have to file for bankruptcy, because the insurance usually is sufficient to pay for the damages. (See the following topic in The Adviser: Insurance.)

To discover whether the liable parties have sufficient assets or insurance to pay a claim, Kenneth Phillips does one or more of the following things when he takes a case:

  • A letter is sent to each of the liable parties, informing them that Mr. Phillips is representing the victim(s), and asking that the letter be sent to the recipient’s insurance company. When the insurance company gets it, a claims adjuster will contact Mr. Phillips as part of the ordinary and standard procedure of the insurance industry. If no response is received, then Mr. Phillips takes one or more of the other steps outlined here.
  • A real property report (i.e., real estate report) is purchased for the address where the dog owner lives. If it indicates that the dog owner owns the home, then Mr. Phillips continues to proceed against the dog owner. If the report indicates that someone else owns the home, Mr. Phillips commences an investigation into the history of the dog, to determine whether there is any possibility of landlord liability. Investigating the dog’s history might also reveal other cases against the dog owner because of the same dog; those cases might lead to finding out about the dog owner’s insurance, if any.
  • An asset report is purchased, with a scope that can be as limited or extensive as the circumstances warrant. This is a rare step because assets can easily be hidden and moved. In some cases, however, it is appropriate.
  • A lawsuit is filed. The main reason is that questions about insurance have to be answered under oath when those questions are asked formally in the context of a lawsuit. The questions might be written (“interrogatories”) or oral (“deposition”). Furthermore, the defendants are required to produce copies of the insurance policy and the policy declarations, which state what the policy limits are. (See this topic in The Adviser: Lawsuit: Why File It.)

If the liable parties do not have insurance or assets sufficient to pay a judgment, other possibilities of recovery must be explored (See the following topic in The Adviser, which contains some information about the other possibilities: Insurance.) Because Mr. Phillips’ role in dog attack claims is to prosecute a civil claim, however, his involvement usually ends when it becomes clear that no such claim would be fruitful. He does not consider it fruitful to force the liable parties to declare bankruptcy; while the victims might derive some satisfaction from that, Mr. Phillips has determined, as a matter of personal choice, that, where his efforts can only hurt dog owners and not help dog bite victims, those efforts should be devoted to improving the lives of the many victims he represents, rather than adversely affecting the lives of the dog owners. Put another way, he has decided, for personal reasons, that he will not prosecute a claim against a dog owner if the only likely result will be bankruptcy, with no positive benefit for the dog bite victim.