What is Vicarious Liability in Liability Insurance?

What is Vicarious Liability in Liability Insurance? - Definition

“Vicarious Liability” in Insurance refers to situations where the Insured Company is held legally liable for actions or omissions of another party. The Company could be held vicariously liable for the actions of your Employees, Contractors etc. Consider an example of a Travel Agency where the employee gets into a fight with the customer and slaps the customer. The customer might sue the Travel Agency Company for Bodily Injury and the Owner of the Travel Agency must defend himself against the lawsuit in court. Which businesses are at risk of Vicarious Liability Claims? Any business which has employees or uses Contractors or Agents is at the risk of Vicarious Liability Claims. If your business is being represented by someone in an official capacity, then your business is at the risk of being held legally liable for the actions or omissions of the person representing your business.

Who is your business Vicariously Liable for?

Your business can be held Vicariously Liable for the actions of anyone representing your business in an official capacity. Mostly, this includes employees, contractors and agents.

1. Employees: A Business can be held liable for the actions of its employees, who are acting within the scope of their job responsibilities. Our Previous example of where the employee slaps the customer of travel agency accurately describes how the business could be held legally liable for the actions of their employees. Businesses are usually held responsible for the negligence of their employees.
2. Contractors: Sometimes, the business can be held vicariously liable for the work of Contractors that it has hired. This usually happens when a Business hires a Contractor which he is not qualified to execute or if the Contractor is performing work that is inherently dangerous to Third Parties.

How can you protect your business from Vicarious Liability?

Vicarious Liability situations are very common and it makes sense to secure your business against claims of Vicarious Liability. There are various Insurance Policies available to protect against Vicarious Liability. Some of these are listed below:

1. Commercial General Liability Insurance Policy: A CGL Insurance Policy covers the legal liability of the Insured arising from claims of Bodily Injury or Property Damage caused by employees. Vicarious Liability Coverage can be added to the CGL Policy as an Endorsement.
2. Errors & Omissions Insurance Policy: An Errors & Omissions Insurance Policy covers the legal liability if an employee or a contractor commits an error in the course of discharging his professional duties.
3. Employment Practices Liability Insurance Policy: An Employment Practices Liability Insurance Policy if an employee files a claim alleging discrimination, wrongful termination.

Conclusion

It is extremely important to secure your business from Vicarious Liability. If you use a Contractor, you can ask the Contractor to purchase an Insurance Policy of his own or ask the Contractor to add your business as an Additional Insured to the Policy. Additionally, you must also have Vicarious Liability Endorsement added to your Liability Insurance Policies. If you have any questions about any Insurance Policy or Insurance Claim, reach out to us via email at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.