The Meaning of Vicarious Liability

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

A concept that many people find confusing is vicarious liability. This term refers to liability that is imposed on one party because of actions committed by someone else. Vicarious liability is also known as imputed liability.

Special Relationship

Vicarious liability arises because of a special relationship that exists between two parties. Typically, one party (Party A) exerts some type of control over the other (Party B) such that Party B acts on Party A's behalf.

If Party B acts negligently and inadvertently causes an accident that injures Party C, Party A may be liable for Party C's injury. Party B may be liable even though he or she personally did nothing wrong. Vicarious liability is a type of strict liability, meaning liability that is not based on fault.

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 under a legal theory called respondeat superior (Latin for "let the master answer"). The employer-employee relationship is often called a master-servant relationship. The master (employer) has control over its servants (employees). If an employee is acting in the course of his or her employment and negligently causes an accident that injures a third party, the injured party may seek restitution from the employer.
  • Partnership-Partner Partners act on behalf of a partnership. Thus, a partnership can be held vicariously liable for negligence committed by a partner. For the partnership to be liable, the partner must have committed the act while acting on the partnership's behalf.
  • 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 owner's car. Suppose that Party A owns a vehicle. Party A allows Party B to drive Party A's vehicle. If Party B inadvertently causes an accident in which a Party C is injured, Party A may be held vicariously liable to Party C for the injury.

General Liability Policies

A general liability policy covers your business for its vicarious liability for negligent acts committed by your employees. This coverage is provided by the policy wording. The policy covers sums the insured is legally obligated to pay as damages because of bodily injury or property damage. If your company is listed as a named insured on your policy, it is an insured. The policy covers your legal obligation to pay damages. This legal obligation is covered whether it arises from negligence you committed directly or from negligence committed by an employee.

Your company is also covered for its vicarious liability arising from acts committed by individuals other than employees if those individuals are acting on your firm's behalf.

For instance, if your firm is a corporation, it is covered for suits arising from negligent acts committed by directors and officers acting on its behalf.

Commercial Auto Policies

If you have purchased a commercial auto policy, your firm should be listed in the declarations as the named insured. Under a commercial auto policy the named insured is covered for the use of any covered auto. The autos that qualify as covered autos depend on the symbols that appear in the declarations. The policy covers your 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 or the negligence of an employee or other permissive user. 

 

 

 

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