N.C. Court of Appeals Allows Negligence Claim Against President of Construction Company A recent ruling by the North Carolina Court of Appeals has greatly increased the scope of general contractor tort liability in North Carolina.
The case, White v. Collins Building, Inc., 704 S.E.2d 307, was decided January 4th 2011. The plaintiffs, owners of an oceanfront home in New Hanover County, filed suit, claiming damages for negligent and defective construction. However, in addition to naming Collins Building, Inc., the general contractor, in the suit, they also named the company’s president personally, alleging that his failure to properly supervise the job constituted negligence.
The Court of Appeals held that the plaintiffs were entitled to sue the president personally and overturned the trial court’s dismissal of the claim.
In arriving at its decision, the Court relied on North Carolina precedent holding that individuals can be held liable for torts they personally commit, even if they do so in their capacity as an officer of a corporation. However, the issue of personal liability of an officer of a corporate general contractor was a matter of first impression for the Court.
More commonly, officers or principals of a company can be held personally liable when a court elects to “pierce the corporate veil” that normally protects individuals from personal liability. Normally, this finding can occur when corporate formalities are being ignored, when the principals of a corporation are knowingly undercapitalizing the corporation, or when the corporation is a “mere instrumentality” of the individual owners. The court in White reasoned that the corporate veil protects individual officers from being held liable for a corporation’s torts, but held that if an officer actually participates in the tortuous conduct, personally liability can be appropriate – even in the absence of factors that would justify piercing the corporate veil.
If you have any questions about this topic or another construction-related issue, please contact Caroline Lindsey, attorney with Anderson Jones, PLLC at (919) 277-2541 or byemail!