Corporate Protection and Negligence Claims in the Construction Industry


Recently the North Carolina Court of Appeals in White v. Collins Building, Inc. et al., addressed the issue of whether a homeowner has a negligence claim against its builder’s principal when the builder was a corporation. The Plaintiffs Andrew and Barbara White (“Plaintiffs”) purchased a beach home from developer, AEA & L, LLC. AEA & L, LLC had contracted with Defendant Collins Building, Inc. (“Corporation”) to construct the residence. Defendant Edwin E. Collins, Jr. (“Collins”) was the sole shareholder of Collins Building, Inc. and the qualifier for the Corporation’s general contractor’s license. Plaintiffs brought a series of claims against the Corporation, Collins, AEA & L, LLC and various subcontractors, but dismissed all claims except the negligence claim against Collins. Collins moved to dismiss the negligence claim against him on the ground that he could not be held individually responsible for the acts of the Corporation. The trial court agreed and allowed Collins’ motion to dismiss, but the Court of Appeals reversed the decision and found in favor of the Plaintiffs.

The Court acknowledged that a properly formed and maintained business entity like a corporation or a limited liability company provides a shield of protection from personal liability for an individual member or officer, but the protection is not absolute. There are two ways to hold an individual corporate officer responsible for the actions of the corporate entity; either by piercing the corporate veil or by establishing direct negligence on the part of the individual member or officer. The latter avenue is the one that the Court of Appeals focused upon in this case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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