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Allowed a friend to borrow my vehicle, and they were involved in a one car accident. Am I still liable if they offer to pay.

San Francisco, CA |

I am the owner of a s-corp.... my company vehicle was lent to a friend by my business partner. The borrower was involved in a 1-car accident; side swiping a pole in a parking lot. Not major, but still will be relatively expensive. I would rather not put it through my insurance as there was a similar $ claim last year, as well as a couple of moving violations by my business partner. The borrower has agreed to pay in full for the damages without me having to make a claim. If I allow them to pay for the damages, and the car is fixed... would they have any legal recourse after the fact to claim that I was financially responsible under vicarious liability, and therefore forcing me to reimburse them for their outlay? Thank you for your time.

Sorry about the confusion, I added the S-corp reference after completing the post. I thought it would be less confusing to write in first person. I'm a 50% shareholder in the corporation. The fear is that the borrower of the vehicle pays to fix the damage but then seeks a refund; because they feel that the corporations insurance should have been responsible all along. At this point the person is willing to pay for damages because of a feeling of personal responsibility, but also because they feel that they are liable by law. From what I have read, they are not personally liable since the car was borrowed with consent. I just the worry that they can change their mind after the fact, and create larger hassles. I guess it's a silly question!

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Attorney answers 1


Your corporation (and you if you hold yourself as the car's owner, aand your business partner co-shareholder, if you and he commingle corporate assets like this) need to get a written release from your friend for any liablity from this accident.

As my colleague pointed out, this is how you lose your corporate shield and get its "veil pierced," holding you personally responsibile for liabilities, because you're not repsecting the corporate's distinct ownership by lending its assets to your friend.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

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