What Insurance Type Will Cover when the "Corporate Veil" is Pierced?

[theyuw]

Hi Everyone,

I run a small business under a registered LLC in CT. I have been recently looking into purchasing both or one: Small Business Insurance and or Personal Liability Insurance. My concern is having to do with piercing the corporate veil. Bottom line: I want to make sure my personal assets are protected as much as possible. Since my business is online and does not have many assets I am not too concerned about losing those (just the personal ones). So my question is:

Lets say that someone sues my company and somehow they are able to pierce the corporate veil and come after my personal assets. If I had one of these insurance types which one would cover my personal assets? I assume its the personal liability insurance but was thinking it might be the business insurance... Any thoughts? Thanks for the help!

 

[Gooner]

I have both personal and business umbrella policies. I've also moved most of my 'assets' out of my name and into separate corporations. Specifically for the reason you mentioned, however my wife's business is a preschool, so it does carry a heavy liability if something were to ever happen. I can't see someone coming after me personally, but I'd rather be cautious. A $5 million business umbrella should pretty much cover my butt.

 

[somarco]

Piercing the veil is possible when an action by the owner, such as using the corp as your personal bank account, exposes personal assets to potential seizure.

If you have never mingled corp assets with personal your personal assets are probably safe. You really should have an attorney review everything and advise on proper ownership if you have significant legal exposure.

If you have significant personal assets and can be held personally liable for actions by yourself, your company or your employee, the plaintiffs attorney may try to access those assets if the normal liability coverage is deemed inadequate. If the courts agree with the plaintiff attorney and allow the corp shield to be pierced your next line of defense is proactive segregation of personal assets.

In other words, make it difficult for attorneys to find and take those assets.

Much better to have a game plan and legal web of protection than hoping an insurance policy will protect your butt.