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Maverick
Maverick, Attorney
Category: Business Law
Satisfied Customers: 5767
Experience:  20 years of professional experience
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This is a story so not sure I can put in all into an email

Customer Question

This is a long story so not sure I can put in all into an email here. I am an independent contractor/agent for a large corporation. Corporation is a 400M per year gross revenue company owned by a 2.1B parent company. I am an independent agent that operates my own business but run under their authority, cargo, liability insurance. They also do all of the billing, collections, and credit approvals for customers. I bid a job back in 2014 that has gone south. We hired a vendor who caused some issues and stole funds and also put us in a hole intentionally where we could no longer meet our contractually obligated pricing to the client. A judgement has been brought against this vendor but the money has not been recouped. All legal proceedings are handled with my corporate office. We then went back and negotiated a revised price to cover us and get out of the project with a profit. We had to hire new vendors who agreed to pricing that kept us within our budget. We are in the trucking logistics business and operate as a non asset based third party logistics provider. We had a company provide us with the trailer that we needed to successfully complete this very complex move. We also then hired another company/tractor and driver to pull the trailer that we rented from the other carrier. The driver met with the owner of the trailer and trained on its operation and assembly for one week. After both parties were comfortable with each other the trailer was put into the drivers possession and he brought it to the loading point. The trailer to be assembled on site and the driver was responsible for its proper assembly. The trailer was put together and loaded with the piece as planned. After successful loading the trailer incurred a failure and was not able to be moved. We are now out a ton of money due to the carriers negligence. We now have found another option to complete the project but with our current costs for all of the mistakes and mishaps we will be at a minimum $100,000 loss once it is all said and done. If things would have went as planned we were estimating a $30,000 profit. Now we are contractually obligated to fill our contract to the client at a substantial loss. Now I know this could be all part of an insurance claim to the negligent company and driver but will the incidental costs due to the situation cover our losses as well? Can this be part of the insurance claim they file with the other carrier? If they deny the claim I know where corporate is going to come for their losses. I have been with them for 10 years and nothing like this has happened before. I have a contract with them that has me personally guaranteed that I am responsible for all losses incurred due to liability, losses, lawsuits etc. The corporate office carries 250K cargo insurance and 2M liability. Now I know they will go after the other company but they are going to ultimately come after me for anything that has not been collected which could be along the lines of 100-150K when it is all said and done. I cannot afford to pay that back and have actually been thinking about moving on to another company. Problem is my contract has a 90 day non compete, and this personal guaranty provision in it holding me accountable. They agreed on everything at the CEO level and all expenses and monies have been sent from their accounts not mine. Just want to know what my liability is and what my options are here.
Submitted: 12 months ago.
Category: Business Law
Expert:  Maverick replied 12 months ago.

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1. Why have you and the company you contract for not filed an insurance claim as of yet?

Customer: replied 12 months ago.
Because that just happened and the project is still ongoing. It just happened recently and I just finished up a damage report which I sent to the corporate office. They are going to, just have to get their ducks in a row.
Expert:  Maverick replied 12 months ago.

Now I know this could be all part of an insurance claim to the negligent company and driver but will the incidental costs due to the situation cover our losses as well?

1. On a negligence and/or breach of contract claim you are entitled to recover incidental costs unless the contract specifically excludes them. On a negligence claim one is entitled to be placed back in the position he would have been in had the negligence never happened. In a breach of contract action, you would be entitled to recover your consequential damages plus the profit expected on the job.

Can this be part of the insurance claim they file with the other carrier?

2. Yes.

I cannot afford to pay that back and have actually been thinking about moving on to another company. Problem is my contract has a 90 day non compete, and this personal guaranty provision in it holding me accountable.

3. If you signed a personal guarantee, then yes, it appears that you would be on the hook but your recourse is to sue the party that breached the contract or the negligent party for the losses that you incur in the same suit that is filed against you. They would be made a third party defendant by you in the suit that is filed against you.

Just want to know what my liability is and what my options are here.

4. Your specific liability would be controlled by the contracts you signed and if there was any negligence on your part. It is a little difficult to understand what all happened; but I would go forward with the insurance claim and see how that pans out. If you intend to sue, be sure to file within 2 years of when the first breach occurred.

Hope this answers your questions. If not just write me back...

Customer: replied 12 months ago.
Thank you so much for your response and your response makes me feel a little better about the situation. The thing is that to begin with the first vendor we hired criminally stole 33K advance from us and contracted with another vendor costing us an additional $62500 for a total of $95k and we had not even started. This began the chain of events that got us to where we are at now. He contracted with a company directly and then disappeared with our cash and left us hostage to the deal that he made with the vendor he hired. They held our cargo hostage until we paid them amounts that were no where in our budget but we had no choice. The corporate office has since been awarded a judgement against him but nothing has been collected. He is a ghost at this point. That was the starting point and where we are at now is with vendor #2 and we are in another bad situation. They are a big company and we probably do 10M per year with them as a company. I would think it would be in their best interest to pay the claims involved as to not be put on do not use with a company that gives them so much business annually. Their agent office and driver were certainly negligent.
Expert:  Maverick replied 11 months ago.

1. The corporate office has since been awarded a judgement against him but nothing has been collected.

This happens sometimes and these people are called judgment proof because there is not much more you can do legally to recover your money. As you say, they are criminals and you ca try to report them to the district attorney's office in the county where they live or in the county where the crime occurred; but my experience has been that the DA's office will tell that this is a civil matter as they are more concerned with dedicating their resources to murders, rapes, robberies, etc...

2. I have read what you wrote and there is not a question there for me to answer. But I am trying to do my best to see what it is that you want answered.

3. Their agent office and driver were certainly negligent.

You may have to send them a letter and ask them directly and point blank how they intend deal with this matter. In other words flush them out so that you know whether you need to take a proactive approach going forward by hiring a local business litigation lawyer.

Customer: replied 11 months ago.
Our corporate lawyer stated to me today that they are a much bigger company with deep pockets and extensive legal team and they are known to be very difficult in claim situations. He said his personal thoughts are it would be very difficult to get anything out of them. Basically what this meant to me is that they are most likely not going to be able to get anything out of them and do not want the legal battle so guess who they are going to come after then? Yes you guess it me. They will just take the losses of 150k estimated and spread them over 5 years and deduct them from monthly commissions. This is there easy way out of this but what they don't know is if they take this stance I am going to resign immediately. That will leave them with the only option to sue me which is going to cost me more money that I have available to fight it. What are my options since we are a little to blame but are ultimately victims of a criminal vendor and a negligent vendor setting off these chain of events but we are left holding the bag.
Expert:  Maverick replied 11 months ago.

If you do not have the money to join and fight the responsible party if and when the company you contract for sues you, then you may want to consider filing bankruptcy to discharge their debt. Not sure if your contract is with them personally or under a corporate name; but either way bankruptcy is the only other option I see.

Customer: replied 11 months ago.
Ok I would like to avoid bankruptcy if at all possible. I finally have great credit and a great life and this is now looming over my head ready to make like a real bitch. If you file bankruptcy do you have to actually have to prove that you do not have the money to pay. I mean I have money in the bank but not to just fork over to someone. Do they get the money that I do have in a judgement and then I can file bankruptcy? I have never done it so not sure how it works? What about hiring a large contingency law firm and go on the offensive?
Expert:  Maverick replied 11 months ago.

1. If you file bankruptcy do you have to actually have to prove that you do not have the money to pay?

Yes, otherwise you will not qualify for BK filing.

2. I mean I have money in the bank but not to just fork over to someone. Do they get the money that I do have in a judgement and then I can file bankruptcy?

Generally, if they obtain a judgment against you then they will seek to collect on it and place liens on your assets. Whatever you are still not able to pay can then be discharged in a bankruptcy filing.

I have never done it so not sure how it works? What about hiring a large contingency law firm and go on the offensive?

Most law firms will not take a business litigation cases of this type on a contingency fee basis; they will want you to pay by the hour. Some may be willing to do a mixed hourly / contingency fee with you. So, yes these are options that should be explored as it would be better than filing for BK if you have the money to pay for lawyers. Further, you may be able to pursue a punitive damage or attorney fee claim against the defendant to help leverage your suit. SO, if they have deep pockets, it may be worth a go so long as you can sustain the fight - you can expect a war of attrition to take place before they cave.

I would seek out a medium sized law firm with 10-20 lawyers to help you with this and the lead counsel you hire should have tried at least 7-10 jury trials to be effective for you.

Customer: replied 11 months ago.
We are looking at probably a cash loss of about $150,000 as of the moment. Now they have stated that they will attempt to collect that back in the insurance claim but not to expect to get it back. It will probably be a year from now but they are ultimately going to come back to me for the funds once the dust settles and I am on the hook for 60% based on my contract. Now if I stay with them they will just dock my commission every month but I am not willing to go forward like that as I am not going to work for free. I guess my options are going to be counter sue the other parties involved if and when this happens. My other option is after this project is over that I can resign from the company and cancel out my contract with them. I am thinking that this will put them on the offensive and they will certainly come after me at this point. I am wondering if I should take an aggressive approach or the wait and see approach on this one? Sorry last time I will bother you with questions, and thanks for the your help. Just very concerned and nervous about the whole situation. Just when you get ahead and things are going great I get hit with this disaster.
Expert:  Maverick replied 11 months ago.

I would say that each month that they doc your commission is proof of your damages so you may want to keep working for them and ask them to work with you on the amount they doc each month so that you can still have income to fight the third party and pay your lawyers to go forward.

Customer: replied 11 months ago.
Ok one more question then based on your response. If I am going to ultimately have to go after the third party involved in a damages suit then I could I not use a large well known contingency firm at this point since there is money to be collected from them? What do you think the chances are that my parent company would just move on with their lives if I was to resign when this is all over and not sue me for the monetary losses?
Expert:  Maverick replied 11 months ago.

Yes, if the contingency firm is willing to take your case, that would be the best way to go. If the third party has insurance coverage for this type of claim, that would certainly help your chances. Since it is a contingency firm, they should be willing to give you a free consult and second opinion as well.

There is no way for me to tell you what the chances are on whether the parent company would just let this go. If their insurance covers the claim, the insurer steps in their shoes and will try to recover the money from you.

Customer: replied 11 months ago.
10-4 the claim for the trailer damages and negligence is a separate issue from the cash losses. We have trailer damages at probably 100k and then have cash losses of $125000 as we speak and that is going to grow. The job was bid at $275000 and we only received 75k advance. Our expenses out of pocket are 200k so we are -125k. We have now turned it over directly to another vendor to finish the project as my parent company does not want anymore exposure on it. We honestly could have finished it for around 373k to us causing the losses to be 94500 instead of $125k but they did not want any further risk.
Expert:  Maverick replied 11 months ago.

Not sure what your asking here...

Customer: replied 11 months ago.
Just that our cash losses are aside from the damages caused to the trailer and equipment by the negligent vendor/driver.
Expert:  Maverick replied 11 months ago.

It is difficult to follow all that happened through this forum but the strategy that we have discussed remain the same. You may have to sue more than one defendant or you may have different damage components against one or more defendants...

Expert:  Maverick replied 11 months ago.

Does that make sense?

Customer: replied 11 months ago.
One more question and then I will wont bother you again. Does their corporate liability insurance cover any of this? Also what are your thoughts on me getting professional liability insurance coverage so I am protected when all this comes to a head down the road.
Expert:  Maverick replied 11 months ago.

1. Commercial liability insurance coverage protects the insured from claims involving bodily injury or property damage, up to the limits of your policy. Most of those policies shield the insured from the expense of out-of-court settlements, litigation fees and judgments awarded by courts. It normally covers accidents and negligent acts and if money is paid out to the insured the insurance company will have a right to go after the responsible persons. These policies typically do not cover claims resulting from a breach of a contract or someone's intentional acts or criminal conduct. So the trailer damage claim resulting from negligence may be covered here. Any related lost profits type damages, however, are typically not covered by the insured own coverage; but may be covered by the negligent party's insurance carrier. Much depends on the exact wording of the policies.

2. The professional liability insurance idea may work, but only if coverage is afforded after full and honest disclosure to the insurer of the known / pre-existing disputes. Otherwise the claim may be denied and you may be the subject of investigation for insurance fraud.

Management and professional liability policies address this issue is through “prior and pending proceeding” or “prior and pending litigation” exclusions. These prior and pending exclusions preclude coverage for those claims that arise out of or relate to matters occurring before the applicable date set forth in the policy [usually the policy inception date or the date when the insured first purchased the liability coverage].

Customer: replied 11 months ago.
the professional liability insurance is not really a viable option unless I disclosed the current situation that is going. The chance of getting coverage I would assume is slim to none as well as the premium would probably be outrageous.
Expert:  Maverick replied 11 months ago.

You may get coverage but as you guessed, premiums are going to be high. Please assign a rating if you are ready to close this question now. Thank you.