Failure to Train
It was a clear and sunny day South Texas day when the Postman delivered a registered letter demanding that he personally pay $ 25,000 due to his gross negligence. He read and re-read the letter trying to figure out what and why. Finally, it dawned on him that this was about a minor accident that happened when Ed, one of his employees, was backing out of the shop and bumped into a lady driving past.
He remembered that when he looked at her car there was barely a scratch. At the time, he told her to have it repaired and send him the bill. Based on that, he had no idea why there was a lawsuit; more importantly he did not understand why was he being sued personally. The car Ed was driving was a company car and it was owned by his corporation. The law suit should be against company and not him, right?
The next thing he did was to go directly to his attorney. His attorney patiently explained under certain circumstances that gross negligence can pierce the corporate veil. Usually this is based on something called “Failure to Train.” He recommended getting his personal insurance company involved.
A week later, he was notified that the plaintiff settled for payment of $ 5,000 from his home owner’s policy.
Although, this lawsuit had little merit and $ 5,000 was a relatively small sum, it was wake up call. Just imagine if the incident had been more serious, it could have been tens of thousands of dollars. No business owner can be complacent about training and documentation. Given the right circumstances, all their personal assets could be at risk.