Why an Owner Is Sued Personally for an Employee's Crash

Attorney Answer

Being named personally is not the same as being held personally liable. Plaintiffs routinely sue everyone who might be a source of payment and sort it out later — that alone is probably most of what happened here. But there are two theories that can make an owner personally liable in California, and one of them you can check today.

The first has nothing to do with piercing the corporation. Vehicle Code § 17150 makes the owner of a motor vehicle liable for death or injury resulting from a negligent or wrongful act in its operation by any person driving with the owner's permission. If a vehicle is registered in your name rather than the company's, you are the owner, and you are a defendant by statute regardless of how carefully the corporation is run. Vehicle Code § 17151(a) caps that statutory owner liability at $15,000 per person, $30,000 per accident and $5,000 for property damage — figures unchanged since 1967 and deliberately not raised with the insurance minimums. That cap does not apply where a separate theory is proven.

The second is alter ego. In Mesler v. Bragg Management Co., 39 Cal. 3d 290 (1985), the California Supreme Court set out the two-part test: there must be such a unity of interest and ownership between the individual and the corporation that their separate personalities no longer really exist, and treating the acts as the corporation's alone must produce an inequitable result. Associated Vendors, Inc. v. Oakland Meat Co., 210 Cal. App. 2d 825 (1962), restates that test and lists the factors courts look at — commingling of funds, disregard of corporate formalities, diversion of corporate assets, and similar signs that the company was not really run as a separate entity.

That standard cuts in your favor and against you at the same time. It is demanding, and merely owning an S corporation does not meet it. But the factor list is exactly where a small corporation that pays personal expenses from the business account gets caught. If your books, minutes and accounts are clean, alter ego is usually where this claim ends.

As for why they are not simply working with the carrier: often they are, and the suit is filed to protect the filing deadline while negotiation continues. Naming every possible defendant early is also how a plaintiff avoids being told later that they sued the wrong party. It is not, by itself, a sign that anyone thinks your insurance is inadequate.

What you can do

1. Send the complaint and summons to your commercial liability carrier today, in writing, and keep proof you sent it. Policies impose their own prompt-notice duties and late tender is a real way to lose a defense.

2. Check who is on the vehicle's registration and title. If it is you personally rather than the corporation, say so to the carrier and to your lawyer immediately — Vehicle Code § 17150 turns on that fact.

3. Do not try to answer the complaint yourself. A served defendant has a short response deadline set by court rules, and missing it can lead to a default judgment. Get a lawyer on it now.

4. Pull together the corporate records — separate bank accounts, minutes, payroll, tax filings, and anything showing personal and company money kept apart. Those are the Associated Vendors factors, and they are your answer to the alter-ego claim.

5. Ask a local attorney whether the lawyer the carrier appoints represents you personally as well as the company. When both are named, that question deserves a direct answer early.

6. Most lawyers offer a brief initial call at no cost, and a few minutes on your specific facts is worth more than any general guidance, including this page.

⏱ Time limits apply. The claim against you runs under Code Civ. Proc. § 335.1 and its two-year period for injury caused by another's wrongful act or neglect; a vehicle-damage claim runs three years under Code Civ. Proc. § 338(c)(1). Separately, once you have been served, the deadline to respond is short and is set by court rules rather than by those statutes. Which dates control depends on your facts — have a local attorney check them immediately.