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The first thing you should do if the claim for the incident has already been made to your corporation's insurance company, is to "tender" the new lawsuit to the insurance company as quickly as possible. You have an obligation to notify the insurance company of the new claim and provide them with enough time to respond.
The insurance company should take care of responding to the claim and representing both the now inactive corporation, and its employee (your nephew).
That's great, I will have to check with my insurance broker.
Does that mean that my nephew is totally, "off the hook" , for any liabialty?
No, but in most cases, the insurance company has sufficient reserves to settle the matter on behalf of the employee. (let me explain)
The employee is still individually liable for their own negligence (the car accident), but the employer is responsible for the torts of its employee during the course and scope of their employment (driving the company van), usually a tort plaintiff will go after the company because they have more resources and insurance than the driver/employee.
Almost all plaintiffs will sue both, as there is "joint and several" liability, it doesn't matter who pays the judgment, both parties are equally responsible for the debt. This means that in most cases, the employer (or their insurance) ends up paying for the full amount of the liability or settlement.
In the worse case scenario, can they put a judgment on my nephew?
Yes, it is possible. But it is usually a lot easier to settle with the business or its insurer, so it usually does not come to this.
Thank You very much