When you or your company is held financially liable for the activities of another group or person, this is known as vicarious liability. This is the legal structure that is most usually used when you are accused of mistakes committed by your contractors, employees, or agents.
What is Vicarious liability?
Vicarious liability means that you can be held legally responsible for another person’s crime, much as living vicariously through someone else involves taking joy in another person’s adventures. Because of the way certain legal relationships work, this is feasible.
Consider the following scenario: one of your staff cleans up a spill in your café but forgets to post a “wet floor” sign. When a customer enters, he or she skids on the wet patch. If the customer is injured as a result of the fall, he or she may file a lawsuit against your company. Even if the incident was caused by your employee’s activities (and even if you asked the person to put up the sign), you and your company could be held liable in the legal sense.
When is your business vicariously liable?
As a business owner, you could be liable for the actions of:
Your employees. The employee must be acting within the scope of their work or professional duties in order for liability to flow from them to you or your company. Even if an employee disregards your instructions, you may be held liable for the consequences of their actions (or inaction).
Agents you work with. Anyone who works on behalf of another person is classified as an “agent”. Agents have the power to change or create legal relationships between the principal and third parties. In most vicarious liability instances involving the agent-principal relationship, both the agent and the principal share some blame, allowing the person affected by the wrongdoing to sue both parties for damages.
What is Vicarious liability insurance?
Although vicarious liability is a frequent factor for business owners, it doesn’t imply your bottom line needs to suffer as a result of other people’s actions or shortcomings. Various types of company insurance explicitly protect businesses from direct and indirect liability costs.
The cost of defending yourself against vicarious liability claims is usually covered by these policies:
General liability insurance covers the costs of litigation arising from personal injuries or third-party property damage caused by you or your workers, as well as incidents that occur on your business premises.
Errors and omissions insurance, often known as professional liability insurance, protects you from the financial consequences of errors and omissions made by you and your team while trying to execute your job.
Workers’ compensation insurance, If you or a co-worker is injured on the job, workers’ compensation insurance will cover your medical bills and missed income.