In two recent cases (Cox v MoJ and Mohamud v Morrisons) the Supreme Court has broadened the scope of vicarious liability; firstly by expanding what employment relationships it applies to (first limb) and secondly by extending for which of the employee's acts an employer is liable (second limb).
Insurers will have to revisit existing cases to reassure themselves any repudiation should remain in place. Cases where insurers have declined cover on the basis the act doesn't fall within the scope of cover will need reviewing and reserving and will require scrutiny.
Cox, which reviewed the first limb, concerned a member of prison staff accidentally injured by a prisoner engaged in rehabilitative work. It was found that vicarious liability would be imposed if the tort arose following employees' business activity on behalf of the employer and the employer created the risk of the tort by employing the employee.
The judgment confirms that the doctrine is not limited to defendants carrying on commercial activities. Providing the organisation is carrying on business activities and has assigned those activities to the wrongdoer, vicarious liability will apply. Accordingly, the doctrine will apply to any organisation.
In relation to the second limb, Mohamud (which concerned the assault by a Morrisons employee on a customer) noted that two issues need to be considered. The first is the 'field of activities' that have been entrusted to the employee, which has to be addressed broadly.
The second issue was whether there was sufficient connection between the position in which he was employed and his wrongful act to make it 'right' for the employer to be held liable.
The Morrisons assistant was employed to attend to customers and had authority to ask people to leave. His conduct towards the customer was clearly unauthorised, but was regarded, tenuously in my opinion, within the 'field of activities'. As the conduct arose from his position, it was deemed just that the employer be liable for his abuse of that position.
The second limb has been applied in a more liberal manner than previously, when vicarious liability only arose if the perpetrator's duties resulted in a special risk of harm, for example wardens in care homes abusing children in their care.
Vicarious liability is likely to assume greater prominence in EL/PL claims in the future, with courts being prepared to hold employers liable for the acts of their employees, which are far more removed from their intended duties.
It is essential insurers revisit any relevant cases where a denial has been issued upon the basis the alleged act falls outside the scope of work. Even if a repudiation is not overturned, a review of reserving would be prudent.
Actuaries and underwriters may need to change the scope of their enquiry to establish the chance of the policyholder being found liable for the unexpected behaviour of an errant employee.
Will it be necessary for the prospective policyholder to warrant that thorough investigations have been made prior to employing staff? Will existing staff have to be more thoroughly checked as part of the policy, with any failure being a breach of a condition precedent? How will the Insurance Act affect such a condition? Will the insurer seek an opt-out from the changes proposed by the Act?
It is a basic principle of insurance that it will not respond to deliberate reckless acts, but in this instance the employee and not employing policyholder would not have carried out a deliberate act. Will employers impose an indemnity clause in employment contracts? Will this be another deterrent to employing staff and where possible using service companies – potentially a futile ruse as the key determinant is control and supervision responsibilities (Lane v Shire Roofing  EWCA Civ 37).
Perhaps the contrary view is that we are not in a different position and I suspect none of the doomsday concerns mentioned above will be acted upon as the class of cases affected is simply too small.