6/30/2016

Connecticut Business LitigationDoes A Limited Liability Company Protect Its Members From Personal Tort Liability? - Connecticut Business Litigation

(HTTP://WWW.CONNECTICUTBUSINESSLITIGATION.COM)

DoesALimitedLiabilityCompanyProtectItsMembers
FromPersonalTortLiability?
N. Kane Bennett (http://www.connecticutbusinesslitigation.com/author/kane-bennett)

Not always. An individual member of an LLC or an of cer of a corporation may be individually

liable for their own torts. This rule is well settled and the Connecticut Supreme Court reaf rmed
it in Strum v. Harb Development
(http://www.connecticutbusinesslitigation.com/uploads/ le/298CR102.pdf),which will be
of cially released on August31, 2010.
Business owners often chose to a form a business entity to operate under, such asa limited
liability company (LLC), limited liability partnership, or professional corporation. In basic terms,
the entity operates as an individualfor legal purposes.There are many reasons to form a business
entity. Oneof themore common reasonsis to limityour personal liability and protect your assets.
The idea is, if you make a mistake in business, theentity is responsible, not you personally.
Many times, a properly formed and maintained business entity, like an LLC or corporation, can
provide a shield or "veil" of protection for an individual member or of cer. However, the
protection is not absolute, andthere are many instances whereyou can be personally liable in
business despite the formation and operation of a business entity. Two of the most common
methods of establishing personal liability are "piercing the corporate veil" and individual
responsibility for torts, such as breach of duciary duty, negligence, fraud, and misrepresentation.
In the Strum case, the Connecticut Supreme Court addressed the later situation involving
personal liability for torts(I will do a post on veil piercing soon). The Strum caseinvolved a
homeowner allegingpoor workmanshipand breach of aconstruction contract for new home
construction. The plaintiff homeowners in the case brought a lawsuit against not only the entity,
Harb Development, LLC, but also its principalmember, John Harb.The plaintiffs alleged, among
other claims, that Mr. Harb was personally liable for negligence. Mr. Harb moved the trial court to

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Connecticut Business LitigationDoes A Limited Liability Company Protect Its Members From Personal Tort Liability? - Connecticut Business Litigation

strike the allegations against him personally seeking protections ofhis LLC, Harb
Development.His attorney argued that absent facts suf cient to pierce the veil of protection of
the LLC,Mr. Harbpersonally was immune from liability.
At the lower level, the trial court granted the motion to strike primarily on the grounds that there
were no facts in the complaint to pierce the veil of the LLC. Although the Supreme Court
ultimately found that there were insuf cient facts alleged in the complaint to establishthe
negligence claim against Mr. Harb personally, the Court rejected the argument that Mr. Harb
could not be personally liable for negligence merely because he was a member of an LLC.
The Supreme Court noted that Connecticuts common law provides for personal liability of
of cers of a corporation for torts personally committed (such as negligence)that injure third
parties provided the injured party can show a legal duty, breach of that duty, causation, and
damages. As such, if an of cer of a corporation commits a tort in business, the of cer may be
personally liable even if the corporation is also responsible. The Strum case makes clear that this
common law rule applies even in the absence of facts suf cient to pierce the corporate veil. This
same common law rule also applies to members of an LLC.
The Strum case serves as a reminder to business owners that formation of a business entity will
not protect you from personal liability in all circumstances
(http://www.aetonlaw.com/Practice-Areas/Business-Formation.shtml). Liability for individual
torts and piercing the veil ofa business entity are two common scenarios where business owners
may face personal liability despite theshield that abusiness entity may provide. Whether a
business ownercan face personal liability fornegligence,fraud, or misrepresentation involving
the businesswill often depend onthe facts of the case.
immunity (http://www.connecticutbusinesslitigation.com/tag/immunity)
limited liability company (http://www.connecticutbusinesslitigation.com/tag/limited-liability-company)
personal liability (http://www.connecticutbusinesslitigation.com/tag/personal-liability)
piercing the veil (http://www.connecticutbusinesslitigation.com/tag/piercing-the-veil)

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