It goes without saying that running a business carries risk. There’s always the possibility that things could go wrong, whether that’s having property stolen, damaging someone else’s property, or an employee getting injured.
Most of these risks are easy to grasp, and therefore easy to protect against – but not all of them are like that. In this blog we take a closer look at Vicarious Liability, which is a common risk, though not always understood outside certain industries.
What is Vicarious Liability?
Vicarious Liability is technically defined as the liability of a principal, for the acts of others. The simplest example in the context of running a business relates to employees, whereby an employer can be held liable for the acts or omissions of their staff.
Here are three scenarios where Vicarious Liability can apply in a work setting:
An employer would usually be liable if an employee (or a self-employed freelancer) was operating camera equipment on behalf of the business in a negligent or inappropriate way, resulting in damage to the studio the business had hired.
The damage caused would normally be covered under Public Liability insurance, with the aggrieved party likely to take any legal action against the business, not the individual concerned.
If an employee is injured, the business is automatically liable under the principle of Strict Liability. While there may be a defence to reduce any compensation through ‘contributory negligence’, that doesn’t absolve the business from being liable in the first place.
Say two employees have a physical altercation in the workplace, and one is injured. The injured party can take legal action against the business, even though it hasn’t really done anything wrong. This is because the organisation will be considered to have failed in its duty to provide a safe working environment.
Now, let’s say it wasn’t a fight, but was instead a spate of bullying. The aggrieved worker can take similar action against the business for the mental anguish they suffered from the bullying employee. These examples demonstrate how Vicarious Liability can come into effect under an Employers’ Liability policy.
As part of a larger project, an agency engages a contractor to produce content for a website. There are errors in the checking procedures from the contractor, and the website content unintentionally breaches the copyright of another. The client sues the agency and holds them liable for the intellectual property breach. Through Vicarious Liability, the agency is therefore deemed liable, and has to pick up the defence and settlement of the claim.
While the agency might be able to pass liability back to the contractor, either directly or by the insurers recouping costs themselves, that isn’t always the case. Often, freelancers and small contractors don’t have insurance, or their cover may be too narrow for the contract, and their insurer might fight against the agency’s action.
Where does recruitment come in?
Businesses in the recruitment sector can have a slightly wider exposure to Vicarious Liability. That’s why some insurers exclude it from their cover, or include it for an additional premium.
It’s particularly relevant for recruiters placing people on a temporary basis, as they can theoretically be deemed to be in control of the system of work. This means the recruiter could be considered their employee even when working on site for the company where they were placed.
Additionally, if the placed person damages something, or makes a costly error in their work, it isn’t always clear who’s liable. The first place to look is usually the terms of engagement for the individual, but these can be a grey area too. Ultimately, recruitment companies must understand the nature of their placements, the contracts involved and what their cover provides.
Reach out to RiskBox
As highlighted in the examples above, a number of insurance policies can protect a business from claims resulting from injury, damage and mistakes caused by their employees, or independent contractors or agents.
To find out more about Vicarious Liability, and how your insurance programme can protect you, speak to RiskBox. You can reach us on 0161 533 0411 or by filling in our online contact form.
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