VICARIOUS LIABILITY DEFINED

The word vicarious comes from the English word vicar which Webster’s dictionary defines (in part) as “one serving as a substitute or agent, an administrative deputy…..” From this word, the term “vicarious liability” has emerged. Looking again at Webster’s, vicarious is defined as:

 “serving instead of someone or something else; performed or suffered by one person as a substitute for another or to the benefit or advantage of another”

Vicarious liability is when one party is held responsible for the actions or conduct of another party. Responsibility is assigned based solely upon the relationship that exists between the two parties. Vicarious liability is commonly used to justify coverage for a type of loss that is, typically, excluded by a policy. However, they are distinct issues.

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PERSONAL VICARIOUS LIABILITY

Vicarious liability is a serious consideration regarding personal exposures. The most common personal exposure to vicarious liability is held by parents. Parents are unquestionably liable for the actions of their minor children. Guardians are also liable for the acts of those persons entrusted into their care, whether that guardianship is over a minor or an adult who is physically or mentally incapacitated.

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To a lesser degree, vicarious liability may also exist under seemingly innocent circumstances. A person participating as a leader or instructor with a non-profit youth or social organization may unknowingly assume a vicarious liability exposure for the youths in that person’s care or trust.

Another very significant personal vicarious liability exposure involves pets and animals. Owners are responsible for the actions of their pets and animals, especially if the animals are large or if they are or could be construed as dangerous. Owners must keep their pets and animals under control and prevent them from causing physical injury to others or from causing property damage. The owners will almost always be held ultimately responsible for injury or damage caused by their pets or animals.

BUSINESS VICARIOUS LIABILITY

Many vicarious liability exposures exist in the business world. Employers and owners are responsible, to a very real degree, for the actions of their employees while those employees are acting in the scope of their job-related duties. Often, circumstances can make this issue unclear.

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Usually vicarious liability stems from injury or damage caused by an employee under a strict employer-employee relationship; but under certain circumstances, the liability exposure for the acts of non-employees such as independent contractors, may be attributed to the owner or general contractor. A property owner, project manager, general contractor or other contractor may be held responsible for the acts of hired sub-contractors or other independent contractors who are working for or on their behalf.

The circumstances where an owner or contractor may be held liable for the actions of others fall into roughly three categories:

1. Work that is inherently dangerous

2. Projects that impose non-delegable duties on the project manager, contractor or owner under local, state or federal law

3. Negligence in the hiring of an incompetent contractor

Other vicarious liability exposures may be assumed, knowingly or unknowingly, in contracts or agreements (though such incidents may actually be considered contractual liability).

INSURANCE AND VICARIOUS LIABILITY

Vicarious liability is a real exposure in both business and personal life. Children, pets and employees are all a part of the equation. One defense against this exposure is a sound liability insurance program. Standard personal and commercial or business liability policies cover the insured’s personal or business liability unless otherwise excluded. Most vicarious liability is not excluded. Thus a solid standard policy will provide the necessary vicarious liability needed in many circumstances such as the following:

However, read the insurance contract carefully for exclusions on liability assumed in contracts or agreements. Other exclusion areas to pay particular attention to are expected or intended injury or acts in both the personal and commercial policies, and workers compensation and employers liability exclusion in commercial policies. For instance, an event may involve legitimate vicarious liability but still not qualify for coverage.

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Even though the vicarious liability exposure is covered under a standard commercial liability policy, there will be times when securing alternative coverage may be wise. Owners or general contractors involved with construction projects may be reluctant to cover vicarious liability arising out of acts of independent contractors on their own master CGL policy. Such reluctance is usually due to the danger that their loss experience might be impaired or their aggregate limits depleted by claims involving exposures over which they have limited (if any) control.

In those cases, the general contractor or owner has some alternatives in covering his or her vicarious liability. One is requiring the independent contractor to buy an Owners and Contractors Protective (OCP) Policy.

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Other alternatives are to have the contractor hold the owner harmless for losses arising out of the contractor's operations or to have the contractor add the owner as an additional insured under the contractor's CGL Policy. These are just some of the possibilities available and each individual entity must carefully evaluate the degree of vicarious liability exposure that results from their personal or business operations, and seek professional counsel to handle properly.