Vicarious liability in insurance

What is vicarious liability?

Vicarious liability is a business's responsibility for the actions of its employees, agents, or contractors. Essentially, it holds business owners liable for someone else's mistakes, even if they were not directly involved.

Vicarious liability insurance covers legal fees and damages if someone sues your business because of an employee's errors or negligence. Several types of insurance policies include vicarious liability insurance protection, which can help in a variety of scenarios.

When is a small business vicariously liable?

A business can be vicariously liable if an employee or contractor makes a mistake or acts carelessly on the job. This is because companies have a responsibility to train and supervise employees. In other words, the law assumes that businesses have some control over how workers behave.

Vicarious liability includes a range of claims, such as:

• Bodily injury: Your vicarious liability insurance can help if an employee causes physical harm to someone else. For example, if a store worker does not warn about a wet floor and a customer slips and falls, the business could be legally responsible for the shopper's injuries.
• Property damage: Vicarious liability can apply if a worker damages another person's property. For instance, a landscaping company might have to pay for a fence its employee broke while operating machinery.
• Libel and slander: If an employee lies to hurt a competitor's reputation, either in writing or speech, you could be responsible. For example, a worker posting negatively about another business on social media could cause a vicarious liability insurance claim.
• Copyright infringement: Business owners can be liable if their employees use copyrighted materials in their work without proper permissions. For instance, a sales representative using unlicensed music or images in a presentation could cause a lawsuit against the company.
• Harassment and discrimination: Vicarious liability claims can relate to harassment and discrimination, such as a worker making unwelcome advances while wearing a shirt with the company logo.

Even good employees and contractors can make mistakes that harm your business. The right insurance coverage can protect from vicarious liability claims, safeguarding your finances and reputation.

Vicarious liability insurance coverage

Several insurance policies include vicarious liability coverage to protect against employees' actions. The main types of business insurance that help with vicarious liability claims are:

General liability

General liability insurance covers bodily injury, property damage, and personal and advertising injury claims from outside parties. You can also get these protections on a business owners policy (BOP).

Professional liability

Professional liability insurance protects businesses that provide advice and services. It covers vicarious liability if a customer claims that an employee's mistake caused financial harm.

Workers' compensation

Workers' compensation insurance covers medical bills and lost wages for employees who are injured on the job. Employees who accept this benefit usually can't sue you for their injuries. But, workers' comp also helps if you get involved in a lawsuit.

Get vicarious liability insurance

Vicarious liability for employers is important because it helps manage financial and reputational risks. It protects you if employees or contractors face legal action that could be tied back to your business.

Luckily, Progressive makes getting vicarious liability coverage easy. You can start a quote online or speak with one of our experts for help determining what type of business insurance you need.