Tuesday, September 30, 2008

Piercing The Corporate Veil In Ohio

The Ohio Supreme Court issued a decision today that modifies the court's position on piercing the corporate veil. The decision is summarized on the court's web page:

In a decision announced today, the Supreme Court of Ohio held that when a plaintiff pursuing a civil lawsuit against a corporation seeks to “pierce the corporate veil” (bypass the corporate structure and recover damages directly from a shareholder), the plaintiff must show that the shareholder used its control of the corporation “in such a manner as to commit fraud, an illegal act, or a similarly unlawful act.”

The 6-1 decision, written by Chief Justice Thomas J. Moyer, modified one part of a three-prong test for piercing the corporate veil this Court established in a 1993 decision, Belvedere Condominium Unit Owners’ Assn. v. R.E. Roark Cos. Inc. [See below for an explanation of the three-prong Belvedere test.] The effect of today’s ruling was to deny an attempt by Kimberly Dombroski, a policyholder whose claim for coverage was denied by Community Insurance Company (CIC), a wholly owned subsidiary of WellPoint Inc., to pursue recovery directly from WellPoint for her claimed physical and emotional injuries arising from alleged bad faith denial of coverage by CIC.

(Mike Frisch)


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