Piercing the Corporate Veil

I’m David Holub, an attorney focusing on personal injury law in northwest Indiana.

Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss personal injury law topics.

Today’s question comes from a caller who was injured in an MVA. She was turned down by attorneys because the at-fault driver was operating a business vehicle for a corporation. The vehicle had no insurance. She wants to know why she can’t collect from the corporation’s owners, a small local delivery business, if she wins her case?

When an at-fault party has no vehicle insurance, the critical question becomes whether the at fault party has assets against which a judgment could be collected.

If assets are available, then perhaps the judgment could be collected against available assets.

Keep in mind, a judgment in an injury case very well might be dischargeable in bankruptcy. But let’s set aside bankruptcy for purposes of this discussion.

Let’s focus on the caller’s question about a local small delivery business corporate defendant.

Suppose a person, or group, forms a corporation. In that case, the corporation can act as a shield to protect the assets of individual shareholders.

In fact, the ability to shield assets from collection efforts is a key feature and benefit of forming a corporation.

But is there a legal way to pierce that corporate shield?

The answer is yes.

It may take effort to pierce the corporate veil in most cases. But, in some circumstances, if the facts are right, it can be done.

Here are the factors courts look at.

Do the facts show that the corporation is organized and controlled and its affairs conducted so that it is a mere instrumentality or adjunct of another corporation? If so, the corporate veil may be pierced, and the fiction of separate corporations may be disregarded.

Does the evidence show perpetration of a fraud or wrong by the parent corporation through its subsidiary? If so, courts can sometimes be persuaded that it is unjust to shield assets from an injury victim.

Here is a real-life example of a case we handled several years ago.

A floral delivery truck ran a red light and injured the client so severely that he was permanently paralyzed.

The truck was owned by Company A (a floral delivery company). But that truck delivered exclusively for a floral arranging company, Company B.

Company A and B had the same shareholders. Same corporate officers. Same accountant and attorney. Kept their supplies and corporate records in the same building and even in the same filing cabinet. Oh, and they shared the same phone number.

We established that though the companies were separate on paper, the corporations acted as one entity. We successfully argued that they should not be recognized as separate entities.

As a result, we were able to collect against the assets of both Company A and Company B.

The entire relationship between corporate entities should be reviewed when determining whether piercing the corporate veil is appropriate.

In short, separate corporate entities may be disregarded when the facts show that the corporations are manipulated or controlled as one enterprise.

I hope you found this information helpful. If you are a victim of someone’s carelessness, substandard medical care, a product defect, work injury, or another personal injury, please call (219) 736-9700 with your questions. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there, make sure you request a copy of our book “Fighting for Truth.”