By: Gregory L. Shelton
Time for a pop quiz.
If you are an officer of a general contracting company, and you supervise construction of a home, can you be sued individually for defects discovered by a later purchaser of the home?
If you answered “Yes,” you are correct according to the North Carolina Court of Appeals. In White v. Collins Building, Inc., 2011 N.C. App. LEXIS 155, 704 S.E.2d 307 (2011), the Court of Appeals held that an officer of a closely held general contracting company could be individually liable to homeowners for the company’s defective work.
Collins Building, Inc., a closely held corporation, contracted with a developer for construction of a beach house. The developer subsequently sold the home to the Whites. After moving in, the Whites began to experience water intrusion through windows and doors during rainstorms. To make matters worse, hot water pipes burst on several occasions, requiring replacement of the home’s hot water pipes.
The Whites sued the president of Collins Building, Inc., claiming that the president negligently supervised the construction. The president argued that he was insulated from liability because he was acting in his capacity as employee of the company. The Court of Appeals disagreed, stating that individuals are liable for their own negligent acts, including negligently supervising construction work. Following this reasoning, the Court concluded that the Whites did not have to pierce the corporate veil to reach the president.
For more information on the White case, please refer to this recent Change Order article, where I discuss the reasoning and possible consequences of this decision.