Tort liability explained – Thimble Insurance

Tort liability is accountability for committing a tort, or a wrong. Alas, it has nothing to do with a multilayered cake filled with delicious ingredients. That’s a torte. However, understanding the law is a sweet first step to protecting your business.

Did you know that even if your business doesn’t commit a crime, it can still be sued for wrongdoing? Civil suits over wrongful actions or omissions are legally referred to as torts. And due to vicarious liability, your business can be held responsible for torts committed by your employees, partners, officers or directors.

Just about every claim in civil court (besides contract disputes) falls under tort law and liability. Read on to learn how you can be prepared if a tort suit comes your way. No chef’s hat is necessary.

What is tort liability?

Simply put, liability refers to responsibility for an action. Tort liability indicates that someone is held accountable for wrong actions (other than under contract.).

Torts are tied to civil court claims. It’s an area of English common law meant to right a wrong (violation of common law, social norms or civil law) without involving criminal punishment. For this reason, the compensation for a tort in most cases comes in the form of financial payback for damages.

To be found in violation of a tort, the victim (called the plaintiff) must prove that the actions of another party (the defendant) harmed them. But it’s not just about harm. The plaintiff must also establish the following:

  • They had a legally protected right, and the defendant had a duty to protect it
  • The defendant failed or violated that duty to protect
  • The plaintiff was harmed, and the harm resulted in any of the following:
    • Loss of future income
    • Loss of earnings
    • Pain and suffering
    • Medical expenses
  • The harm or injury was a direct result of the defendant’s failure or violation

In some cases, the court may award punitive damages. This is money the court orders the defendant to pay to prevent the action from happening again.

What is not a tort?

Read more: Full Coverage Auto Insurance vs. Full Tort Insurance Coverage

Question: When is wrongdoing not a crime? Answer: When it’s a tort.

Torts are not crimes. Crimes are violations of legal statutes by municipal, state or federal authorities.

  • Torts: Typically impact one or a limited number of people. A fine or monetary compensation usually resolves the matter.
  • Crimes: Impact society as a greater whole. Although fines may be levied, crimes also result in loss of civil liberties, prison sentences, etc.

A general liability insurance policy often covers the damages and legal fees associated with a tort claim. However, committing a crime would likely void this type of small business insurance policy.

Categories of tort law

Most tort cases fall into a few primary categories, covered below.

Intentional tort liability

An intentional tort is a deliberate act committed by one person or party that caused harm or damage to another. Intentional torts can be split into subcategories, including:

  • Physical injuries – Some torts, such as battery, can cause physical injuries. Whether the injury itself was intentional or accidental doesn’t matter since the action preceded the injury.
  • Reputational or psychological harm – Other torts, like the invasion of privacy or slander, can cause psychological damage.

Workplace torts or business torts are a subset of intentional torts committed by an employer against their employees. Examples include:

  • Wrongful termination
  • Wrongful demotion
  • Employment discrimination

Strict tort liability

Strict liability torts aren’t triggered by intent or negligence. A strictly liable person is responsible for the consequences of a specific action or practice, even if they’re not at fault or didn’t intend harm. The strict liability definition focuses on the act itself and not the person doing harm. Strict liability exists for situations that are abnormally dangerous.

Negligent tort liability

A negligent tort refers to the harm done to others because you failed to exercise a certain level of care to prevent the damage or injury. It’s also known as a reasonable standard of care tort.

Read more: Full Tort Vs. Limited Tort Car Insurance

Negligence is not limited to professional liability. It may also apply to general liability or auto. The consequences of a negligent act may not be covered by the insurance policy depending on the circumstances.

Examples of tort liability

When could you be held liable in a tort claim? The following examples illustrate a few scenarios.

Intentional torts

Intentional torts are committed with the intention to harm. For example, you could be held liable for employment discrimination if you deny reasonable accommodations requested by an employee with a disability.1

If one of your employees trespasses through private property on their way to set up for an event, you could be held responsible if damage or harm occurs as a result of their trespass.

Strict torts

Strict tort liability does not take intention into account. If your company makes a product that turns out to be defective, you could be held liable for any harm the product caused, even if the product intends to be helpful to the consumer. This type of claim is a product liability tort.

Another scenario in which strict tort liability could apply is in the harboring of certain animals. Should you keep a dangerous wild animal on your property and the animal bites someone, you could be responsible for covering their medical treatment costs.

Negligent torts

Negligence applies when someone’s actions are unreasonably unsafe. Should one of your employees run a red light while making a business delivery, you could be liable for damages if they cause an accident or hurt someone. In this scenario, auto liability coverage could apply but might not necessarily cover the full extent of damages.

If you provide professional advice that causes financial harm to your client, you could be held liable for negligence. On the other hand, if you do not provide advice that could have prevented harm to the client, you could also be held accountable. The standard is “reasonable care,” which can be difficult to define.

Read more: Tort claim? What it means and why its your gateway to personal injury justice

Product liability tort claims can also fall under the negligent tort umbrella.

Tort liability insurance

Think of general liability insurance coverage as a potential shield against the financial impact of tort claims. Whether the tort is based on intention, negligence or strict liability, this type of policy can help cover the following:

  • Bodily injury
  • Property damage
  • Personal and advertising injury

However, a general liability policy won’t cover everything. For example, for torts claiming financial losses resulting from professional mistakes or advice, you’d need professional liability insurance, also known as errors and omission (E&O) insurance.

Professional liability insurance covers:

  • Defense of claims
  • Actual or alleged negligence
  • False or frivolous claims

The type of work you do and the nature of your business will determine the coverage you need.

Put your small business in the protection sweet spot

Running a small business involves an element of risk. That’s why preparation is important. Whatever the size of your business, with Thimble, you can choose coverage by the job, month or year. And you can modify, pause or cancel anytime. Start by downloading the Thimble app or clicking “Get a quote.” Answer a few brief questions and get covered within minutes.

Thimble is quick-thinking insurance for fast-moving businesses. It’s simple and flexible, so you can focus on doing what you do best. It’s a piece of cake!

Source:

  1. U.S. Equal Employment Opportunity Commission. What is Employment Discrimination?

Through this article, we hope to help you understand What is tort insurance

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