Piercing the Corporate Veil in Injury Cases

Although incorporation provides a substantial amount of insulation to the owners from liability for injury claims the insulation is not absolute. Texas law provides that the owners of a corporation may be held individually liable for the debts and obligations of the corporation in the situation where the corporate fiction is used to perpetrate a fraud, for the owners’ benefit, to evade legal obligations, or to circumvent a statute. The corporate veil may be pierced in the situation where the corporate insurance and assets are insufficient to meet the reasonably anticipated debts and liabilities of the corporation.

While the notion that incorporated businesses should be able to attract investors or shareholders without the investors or shareholders being exposed to liability for the day to day operations of the corporation is desirable many have sought to abuse the corporate fiction resulting in the doctrines regarding the piercing of the corporate veil.

Take for example the situation in which a logging contractor holds all of the assets of his business in his individual name and leases them to his incorporated logging business. The contractor then buys minimal or no liability insurance. The incorporated business is both undercapitalized and underinsured in light of the reasonably anticipated risks associated with operating log trucks on the public roadway. In such a situation the corporate veil may be pierced and the individual owner may be held personally responsible for corporate liabilities.

For more information contact a Tyler Injury Lawyer today.