Scenario II - Organizations and Liability Vance Armstrong was the sole incorpora

Question

Scenario II - Organizations and Liability

Vance Armstrong was the sole incorporator of Triathlon Training Inc., a corporation designed to operate a training center for triathletes of all ages. The business was incorporated according to Florida law in January 2015, with Armstrong as the sole director and shareholder. Armstrong contributed $20,000 of starting capital, which was just enough to make minor repairs to the property he purchased for $400,000 with a loan from the bank. The corporation had no liability insurance. On June 15, 2015, the center opened for business. Over the next few months, the corporation operated with a profit.

In July, Armstrong took a two-week vacation in France and used a check written on the company bank account to purchase his airline ticket. In September, Armstrong decided to have the pool resurfaced. Because business had slowed and the corporation's bank account did not have sufficient funds, Armstrong wrote a personal check to cover the work. Armstrong feared he would not make enough money through the winter to turn a profit, so he decided to work a part-time job selling fitness equipment as an independent contractor for Bowflex. Armstrong used the training center's office phone to make calls, the copy machine for copies, and the computer for searches. He made a substantial profit, which was maintained in a third bank account not associated with Triathlon Training or his personal account.

On April 1, 2016, a child with a mild learning disability drowned in the pool while training for the local children’s triathlon. The parents brought a suit for wrongful death against Triathlon Training Inc. and against Armstrong in his individual capacity as owner. At the time of the suit, the corporation had less than $2,500 in its bank account. Because of these limited funds, the child's parents hoped to recover most of their damages directly from Armstrong, who lived in a mansion on the beach.

Will the parents be successful in holding Triathlon Training Inc. liable for the child's death?

What should the parents argue in order to hold Vance Armstrong liable in his individual capacity? Will the parents prevail? Why or why not?

How could Armstrong have protected himself against this type of potential liability?

Explanation / Answer

In sole ownership enterprises, business liability is absolute. Hence, any claims mandated by the courts will be recovered in full through the personal ownership of assets in case the said business is deemed financially inadequate. Therefore Vance Armstrong is liable in his individual capacity to pay damages.

The parents have the full rights to sue Triathlon Training Inc. for their child's death and claim compensation as the training center / Vance Armstrong was in charge of the pool and hence responsible for safety of its users. The parents will argue that their child was undergoing training at the center on the assurances of its owner and safety and well being of their ward was the owner's responsibility. They are most likely to prevail in the court of law as the training center needs to have full safety mechanism to ensure no injuries or fatalities occur on its premises.

Armstrong should have taken liability insurance to protect himself against such potential liability at the outset itself. Secondly, on the operational front, he should have better safety and supervision mechanism to prevent occurrences of such mishaps.  

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.