LAW 633 Lecture Notes - Lecture 45: Liability Insurance, Piercing The Corporate Veil, Vehicle Insurance
31 May 2020
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Piercing policy: limited liability can result in creditors, rather than shareholders, bearing much of the costs of business failure. The effects on share trading don"t matter if shares don"t trade. Crazy structure is not sufficient: dissent: corporation is undercapitalized because it paid minimum car insurance, structure was chosen specifically to avoid responsibility, facts, william carlton (defendant) owned a large taxicab business. Carlton was a controlling shareholder of 10 different corporations, each of which held title to two cabs and no other assets. This is relevant, but it is not enough to allow a plaintiff to pierce the veil. Telecom corporation (defendant): when telecom formed contrux, it contributed loans, not equity, and did not pay for all of the stock that was issued. Insurance meets this policy just as well as other forms of capitalization. The purpose of the limited liability doctrine is to protect a parent corporation when a subsidiary becomes insolvent.
