The Meaning of Vicarious Liability

Cartoon drawing of two cars after a minor accident
Image courtesy of [pijama61] / Getty Images.

Vicarious liability means liability imposed on one party because of actions committed by someone else. It is not based on negligence. Vicarious liability is also known as imputed liability.

A Matter of Control

Vicarious liability arises because of a special relationship that exists between two parties. Typically, one party exerts some type of control over the second party. The party in control may be held liable if the second party acts negligently, and inadvertently injures a third party.

Vicarious liability is a type of strict liability, meaning it is not based on fault. A party may be held vicariously liable for an injury even though he or she did nothing wrong personally.

Business Relationships

There are a number of business relationships that can create vicarious liability. Here are some examples:

Employer-Employee

Employers may be held vicariously liable for negligence committed by their employees. The employer's liability derives from a legal theory called respondeat superior (Latin for "let the master answer"). The employer-employee relationship is often called a master-servant relationship. This is because the employer (master) has control over its employees (servants). Thus, employers may be sued by third parties who have been injured in accidents caused by negligent employees. 

Partnership-Partner

Partners act on behalf of a partnership. Thus, a partnership can be held vicariously liable for negligence committed by a partner.

For example, a partner in a legal firm negligently leaves an extension cord draped across his office. A client visiting the office trips over the cord and breaks his leg. When the accident occurred, the partner (the negligent party) was performing his duties as a lawyer for the benefit of the partnership.

Consequently, the partnership may be held vicariously liable for the client's injury. 

Corporation-Director or Executive Officer

Corporate directors and executive officers perform their duties on the corporation's behalf. Consequently, a corporation can be held vicariously liable for negligence committed by its directors and officers.

Vehicle Owner-Permissive User

Vicarious liability may apply to a vehicle owner who permits another person (called a permissive user) to drive the auto. Suppose that Steve owns a car that he loans to Bart. While driving Steve's vehicle, Bart inadvertently causes an accident in which Lisa is injured. As the vehicle owner, Steve may be held vicariously liable to Lisa for her injury.

General Liability Policies

Except for sole proprietorships, businesses can't perform acts themselves. They act only through their employees, executive officers and other key individuals. Businesses are covered under general liability policies for their vicarious liability for negligent acts committed by these individuals.

Bodily Injury or Property Damage Liability covers sums the insured is legally obligated to pay as damages because of bodily injury or property damage. The insured's legal obligation is covered whether it arises from the insured's own negligence or from negligence committed by someone else.

If your firm is insured under a general liability policy, it is covered for its vicariously liability for negligence committed by its employees, volunteers, and other people acting on its behalf.

Commercial Auto Policies

If you have purchased a commercial auto policy, your firm should be listed as the named insured in the declarations. As the named insured, your firm is covered for its vicarious liability for accidents resulting from the use of any covered auto. The autos that qualify as covered autos depend on the symbols that appear in the declarations.

The auto policy covers your firm's legal obligation to pay damages for bodily injury or property damage caused by an accident, if the accident results from the use of a covered auto. Your legal obligation is covered whether it stems from your negligent use of an auto (if you are a sole proprietorship) or the negligence of an employee or other permissive user.