INSURANCE
fices, too. An advisor might have spent years structuring a client portfolio for the best outcomes— finding appropriate investments, minimizing taxes on them, and writing up estate documents for wealth transfer to heirs— only to see a massive amount of wealth wiped out all at once by a jury award, simply because the advisor hadn’ t anticipated these more litigious times. It can no longer be considered a marginal risk.
Many wealth managers likely take comfort in the assumption that extensive insurance or workers’ compensation programs solve this problem. But it’ s not that simple, and there are limits to what insurance can do.
Let’ s take a hypothetical example: A homeowner hires a contractor to renovate or expand their property. During the project, an employee of the contractor suffers a severe injury. Under most state workers’ compensation statutes, that employee is entitled to benefits on a no-fault basis and, in exchange, waives the right to sue the employer. But workers’ comp benefits are statutorily limited and exclude the types of damages( pain and suffering, emotional distress, and punitive awards) that drive nuclear verdicts.
In severe cases, injured workers and their attorneys begin looking elsewhere for recovery. Homeowners, especially those with visible wealth, become attractive targets. Even if their fault is minimal or nonexistent, plaintiffs file lawsuits searching for other deep pockets. The legal principle at work here is known as“ vicarious liability,” where one party is held responsible for the acts of another within certain relationships.
While the homeowner story is hypothetical, the exposure isn’ t. Such liabilities are expanding and increasingly arising among people who work closely with the wealthy: household staff, contractors, volunteers, nonprofit board members, hosts for private events, etc.
Again, merely extending insurance won’ t solve the problem. You might turn
Many wealth managers likely take comfort in the assumption that extensive insurance or workers’ compensation programs solve the nuclear verdict problem. But it’ s not that simple.
to personal umbrella and excess liability policies for added protection, but these must be properly designed. Such policies are governed by detailed schedules, definitions, exclusions, and endorsements. The coverage is often triggered only after the underlying insurance is used up, meaning gaps below can become gaps above. The policies might not cover the new types of relationships that are forged in our modern life— when various third parties are participating in our different activities. Such business relationships may require endorsements that not all insurance carriers are willing to provide. So simply seeing a multimillion-dollar umbrella policy on a balance sheet is not enough to conclude that the risk has been addressed.
There are also common misconceptions about coverage. Take the homeowner example, and the belief that a contractor’ s insurance automatically protects a homeowner. In most standard, unmodified business insurance policies, that’ s not the case. Without proper contractual risk transfer, which includes appropriate policy language in the coverage, the homeowner may remain fully exposed. This is not a failure of insurance; it is a failure of risk management coordination and oversight.
These verdicts increasingly rely on noneconomic damages( things like pain and suffering) that are influenced by jury“ anchoring” tactics, where plaintiffs suggest extraordinarily high figures to reset jurors’ sense of what is reasonable. Critics say these are becoming increasingly subjective and thus inflating awards. Media coverage and aggressive advertising by the plaintiffs’ bar further normalize these numbers in the public consciousness.
For wealth managers, the takeaway is clear: Investment risk and liability risk are no longer separable conversations, and if an advisor fails to work personal risk management into the client’ s holistic wealth planning, that’ s no longer a benign oversight. It is a professional risk.
Managing this exposure requires something more than reactive insurance purchasing. It demands proactive risk architecture: contractual risk controls with third parties, a coordinated review of underlying and excess policies and ongoing oversight as family activities and assets evolve.
As nuclear verdicts continue to rise, wealth managers must broaden their understanding of fiduciary care. Protecting assets today means recognizing that the greatest threat may not come from the markets but from the courtroom.
KENNETH GOLSAN is co-founder and CEO of Golsan Scruggs, an insurance broker for the financial services industry. CRAIG CARTMILL is the director of Golsan Scruggs Private Client.
52 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER / OCTOBER 2026 WWW. FA-MAG. COM