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Vicarious Liability
Hello & welcome to our mid-winter newsletter. This month I want to discuss with you one of those insurance terms which when I mention it, most people say ~ ‘what? Vicarious liability is an unusual extension to many Liability policies & arises from the common law doctrine of agency; where it imposes responsibility upon one person for the civil wrongs of another person under the law of Torts. Vicarious liability is a form of secondary liability.
Common forms of vicarious liability:
Strict Vicarious Liability
There need not be any negligence on the part of one party for such party to be held responsible for the civil wrongs of another party. A common example of strict vicarious liability is the owner of a vehicle who is vicariously liable for any fines or infringements if any authorised third party uses the owner’s vehicle.
Employer/Employee
Employers are vicariously liable for negligent acts or omissions of their employees. For vicarious liability to apply, the following elements must be present:
- the negligent act or omission must be in the course of employment;
- such acts must either be authorised or be so connected with the act in the course of employment.
Principal/Contractor
Contractors may be held vicariously liable to their principal if their subcontractor causes any loss, damage or injury to the principal or third parties in the course of carrying out any work/services for the principal. For the contractor to be held liable for the act, error or omission of its subcontractor, the following elements must be present:
- the negligent act or omission of the subcontractor must fall within the scope of the services & terms of reference or authority between the subcontractor & the contractor;
- the contractor must have the right, ability or duty to control the acts of the subcontractor whether such right, ability or duty to control arises under contract, tort or otherwise. This does not mean the contractor must personally supervise its subcontractor. The contractor is engaging the subcontractor & is able to rely on the ‘reasonable’ skill, care, & diligence of such professional or trade services under common law.
- For the contractor to be vicariously liable to the principal (&/or those to whom the principal is responsible for or has a duty of care), the negligence or liability must fall within the scope of the services in the course of the terms of the contract between the contractor & the principal.
Example: Cleaning Company
A cleaning company was contracted to maintain & clean the offices & common areas of a commercial building in Auckland CBD. The scope of services in the contract included rubbish removal in the basement carpark & the terms of reference stipulated the cleaning company must subcontract the rubbish removal services to a rubbish removal company nominated by the building owner. The cleaning company therefore subcontracted the rubbish removal services in the basement carpark to a rubbish removal company approved by the building owner. The building owner issued the access key to the basement carpark to the cleaning company for its subcontractor’s rubbish removal services after business hours.
The subcontractor decided to hold his birthday party on a Friday night at a restaurant/bar in the CBD. As parking was a problem in the CBD, the subcontractor without the knowledge or the consent of the cleaning company or the building owner, decided he would use his access key to the basement carpark for his friends to park their vehicles. After his birthday dinner, some of his friends were intoxicated & started vandalising & damaging the building fixtures & other tenants’ vehicles which were parked overnight in the carpark.
The loss amounted to more than $200,000. Security forage found the rubbish removal subcontractor liable for the damages. The building owner sought damages against the cleaning company whose insurer declined the claim on the basis its client was not vicariously liable for the loss/damage as the loss did not arise from or was so connected with the cleaning & rubbish removal services. The building owner had to lodge the claim directly against the subcontractor.
I hope you have found this brief overview & comments both interesting & helpful. If there is any aspect you would like clarification or enquiries on any liability issue, please feel free to contact Carla or myself.
Trust you are all keeping warm. Until next time, best wishes.
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