Vicarious liability is a legal concept where a person is held responsible for actions committed by someone else. So, with vicarious liability, you may be held responsible for an injury suffered by another person. Vicarious liability is also called imputed liability.
Vicarious liability is a form of strict liability, meaning liability in the absence of negligence. It exists when two parties have a special relationship based on a business or family connection. Here are some common legal relationships that involve vicarious liability:
- Employer-employee. Employers are vicariously liable for acts their workers commit in the course of employment.
- Partnership-partner. Partnerships are vicariously liable for acts committed by partners. Individual partners may also be liable for the acts of their fellow partners.
- Parent-child. Parents may be held vicariously liable for negligent acts committed by their children.
- Corporation-directors and officers. Corporations are vicariously liable for negligent acts committed by directors and officers while performing their duties on behalf of the organization.
Why Are Businesses Responsible for What Their Employees Do?
Employers are vicariously liable for the acts of their employees under a legal doctrine called respondeat superior, which is Latin for “let the master answer." It essentially means the employer is responsible for things like negligence, libel, wrongful conviction and other civil wrongs (also known as torts) committed by their employees.
Business owners have the right to control the work their employees perform and to dictate how that work is carried out. They also have a legal duty to maintain a safe workplace, employ competent workers, and train their employees properly. Because businesses have control over their workers and the workplace, they are liable if an employee acts negligently and accidentally harms a third party. To sue the employer for compensation, the injured party need only prove that the worker was negligent, the worker’s negligence caused their injury, and the worker was an employee of the employer. Because of respondeat superior, they don’t have to prove that the employer was negligent.
The concept of respondeat superior extends to the use of autos. Employers are vicariously liable for injuries sustained by third parties in auto accidents caused by employees driving vehicles on the employer’s behalf. Employers are responsible whether employees are driving company-owned vehicles or their personal autos.
When Are Workers "On the Clock"?
The doctrine of respondeat superior applies only to acts employees commit in the scope of employment. Employers aren’t responsible for negligence employees commit “off the clock.” When an accident has occurred, whether a worker was on or off the clock when the incident took place can be a matter of debate. Many disputes involve accidents that have occurred while a worker was commuting to or from work, at an off-hours social event, or combining a personal errand with a work-related task. To help resolve such disputes, courts have developed the rules outlined below.
Commuting to Work
Many states have a law similar to California’s “coming and going rule,” which states that employees aren’t in the course of employment while commuting to and from their workplace in their personal vehicles. An exception applies if the employer pays the worker for the commute time or asks them to run a work-related errand on their way to or from work.
A worker is also considered “on the job” if the employer requires the worker to drive to and from the workplace so their vehicle can be used in the employer’s business. For example, if Jill’s employer requires her to drive her personal car to work so she can use it to visit clients, Jill is “on the clock” while traveling to and from her workplace. If during her commute she inadvertently causes a car accident that injures another driver, Jill’s employer will be vicariously liable for the injury.
Are workers "on the job" when attending a company-sponsored social event like an office Christmas party? The answer generally depends on whether the worker’s attendance at the event is mandatory or voluntary, and whether the employer benefits from the employee’s presence. As the following example demonstrates, social events create a risk of vicarious liability for employers, especially when alcohol is involved.
For example, Divine Designs, an architectural firm, is hosting a holiday party for employees and clients. Employees are expected but not required to attend. The firm has provided both alcoholic and non-alcoholic beverages at a self-service bar. It’s now 11 p.m. and Bill, a Divine Designs employee, has been drinking rum-spiked punch for hours. He decides it’s time to leave and toddles to his car.
Bill is driving home in his personal vehicle when he runs a red light and broadsides another car. If the other driver is injured in the accident, will Divine Designs be liable for his injury? The answer may be yes. Because the party involved clients, Divine Designs likely benefited from Bill’s attendance. Also, while the company didn’t require workers to attend the party, Bill may have believed his career there would suffer if he failed to appear. Thirdly, if Bill was legally drunk when the accident occurred, his employer may be liable for his intoxication since it made liquor readily available.
Frolic or Detour
Employees often multi-task, running a personal errand while completing a job assigned by their employer. If a worker combines a personal errand with a work-related task and is subsequently involved in an accident, was the worker “on the clock” when the accident occurred? To answer that question, courts have devised a legal concept called “frolic and detour.” A frolic is a major departure (either in terms of the time spent or the distance traveled) from the worker’s normal work responsibilities, while a detour is a minor departure. Generally, a worker is considered “off the clock” when engaging in a frolic and “on the clock” when making a detour. Here’s an example.
Alan is employed by Ace Accounting. One day, Alan’s boss asks him to drive to a nearby supermarket and buy supplies for an upcoming event. Alan complies and drives to the store in his personal vehicle. After finishing his shopping, Alan gets a haircut at a barbershop located next door to the store. He is driving back to his workplace when he accidentally rear-ends another vehicle, injuring the driver. Was Alan in the course of employment when the accident occurred?
Alan combined a work-related task (the trip to the store) with a personal task (the haircut). Because the barbershop was situated next to the grocery store, a court might consider the haircut a detour. If so, Alan was “in the course of employment” when the accident occurred and his employer is vicariously liable for the accident.
Now suppose that Alan finishes his shopping and instead of getting a haircut, he drives five miles to a dry cleaner to pick up his laundry. The accident occurs while he’s returning to his workplace. Because of the distance between the store and the dry cleaners, Alan’s trip to the cleaners might qualify as a “frolic.” In that case, Alan was “off the clock” when the accident occurred, and Alan (not his employer) would be liable for the accident.
The doctrine of respondeat superior doesn’t generally apply to independent contractors. This is because a business that hires a contractor doesn’t normally control the contractors’ work. Typically, the contractor provides the materials, tools, and workers it needs, and it directs the work. Consequently, the contractor (not the hiring company) is liable for negligent acts committed by its employees.
While businesses are generally exempt from tort liability for the actions of their independent contractors, there are some exceptions. A business may be vicariously liable for a contractor’s negligence if:
- The business chose an incompetent contractor. A business may be sued for negligent hiring if it hires an unqualified contractor who injures a third party.
- The work it hired the contractor to perform was inherently dangerous. For instance, a general contractor might be held liable for a subcontractor’s mishandling of explosives since explosives are inherently dangerous.
- The business failed to fulfill a duty it couldn’t legally delegate to the contractor. For instance, businesses have a legal duty to maintain a safe workplace and they can’t delegate that duty to an independent contractor.
Vicarious Liability for Drivers of Business-Owned Cars
The laws in some states (including California) hold vehicle owners vicariously liable if they allow another person to drive their auto, and the driver causes an accident that injures a third party. As noted previously, businesses are liable under respondeat superior for accidents caused by negligent employee drivers. Because of vicarious liability laws, businesses may be held responsible for accidents caused by drivers who aren’t employees.
For example, suppose you own a flower shop. Your company owns two vehicles: a delivery van and small pickup. Your delivery van has broken down and a customer urgently needs the flowers he ordered. Your friend Susan stops by your store and offers to deliver the flowers using the company pickup. You gratefully accept and Susan drives off in the pickup. Susan has made the delivery and is heading back to your store when she accidentally rear ends another vehicle. The other driver is injured and their vehicle is damaged. Susan was using your company vehicle on your behalf with your permission when the accident occurred. Consequently, your company will be vicariously liable for the other driver’s injuries and the damage to their vehicle.
Business Insurance for Vicarious Liability Claims
Businesses can protect themselves against vicarious liability claims by buying liability insurance. Most commercial liability policies cover claims against businesses that result from negligent acts committed by employees and other individuals who act on the company’s behalf. Some insurance coverages often purchased by small business owners include general liability, commercial auto, professional liability, and workers’ compensation.
General Liability Insurance
The standard commercial general liability policy covers damages the insured is legally obligated to pay because of bodily injury, property damage, or personal and advertising injury. If an insured business becomes legally obligated to pay damages because of negligent acts committed by employees or other parties acting on the business’ behalf, those damages will be covered.
The standard general liability policy doesn’t exclude acts committed by independent contractors. This means a business that hires an independent contractor is automatically covered for its vicarious liability for the contractor’s negligence. For example, suppose that Happy Hardware hires Paradise Painting to paint the exterior of Happy’s hardware store. A Paradise Painting employee is on a ladder painting the eaves near the doorway when he accidentally drops a bucket of paint on a customer. The customer is injured and sues Happy Hardware, claiming the store negligently hired an incompetent contractor. If Happy Hardware forwards the suit to its insurance company, the claim should be covered by Happy Hardware’s general liability policy.
Commercial Auto Insurance
The standard business auto policy covers damages an insured must legally pay because of bodily injury or property damage resulting from the ownership, maintenance or use of a covered auto. The business named in the declarations is covered for its vicarious liability for accidents involving any covered auto. Which vehicles are “covered autos” depends on the scope of coverage the business has purchased. Many businesses choose the broadest level of coverage, which includes company-owned autos, hired autos, and non-owned autos. An example of a non-owned auto is a vehicle owned by an employee and used in their employer’s business.
Professional liability (also called errors and omissions insurance) covers a business’ vicarious liability for negligence, errors or omissions committed by employees and other individuals acting on the business’ behalf. Examples of professional liability insurance are malpractice insurance, employment practices liability insurance (EPLI), and directors and officers insurance.
Workers’ Compensation Insurance
Vicarious liability isn’t relevant to workers’ compensation insurance since workers’ comp isn’t a third-party coverage and workers’ comp benefits aren't based on fault. Workers injured on the job receive benefits whether the accident that caused their injury resulted from negligence committed by the worker, the employer, or someone else.
Vicarious liability is relevant to employers’ liability insurance, which is included in most workers’ compensation policies. Employers' liability insurance covers (among other things) suits against employers by workers who are injured on the job but aren’t eligible for workers’ comp benefits. Examples are casual workers and some domestic and agricultural workers. The insurance covers damages for which the employer is legally liable (directly or vicariously) because of a work-related injury to an employee.
Protect Your Business from Vicarious Liability Claims
Since businesses rely on people to carry out their mission, they are vicariously liable when those individuals inadvertently cause accidents that harm others. You can insure your business for your vicarious liability to others by purchasing commercial liability insurance.
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
At ABC Agency, we pride ourselves on providing robust, comprehensive coverage options to companies like yours with flexible, pay-as-you-go plans.
Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
5. Introducing a New Product
A happy client may want to expand their business with you.
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I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
If you're still happy with the coverage, we can easily renew it for you.
Do you have some time to chat this week?
Looking forward to serving you again!