If an LLP is sued due to a partner's negligence, I understand that partner's personal assets could be at risk if the liability coverage is inadequate. Is the LLP structure beneficial because it protects the other partner's (the one not responsible) personal assets then?
1 Answer from Attorneys
Not necessarily. It depends on whether the LLP was either adequately funded or insured for reasonably anticipated business risks for the type of business conducted, such as a negligent partner. In general, the courts will not allow an injured party to be deprived of the opportunity to recover just on the basis of the members of a business entity having limited liability. The court will inquire further to see if the members intentionally under insured or under capitalized their business entity.
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