Vicarious Liability - Practical implications of recent court decisions

  • There have been concerns stemming from a number of recent court decisions relating to vicarious liability
  • What do they mean in practice and what are the implications for organisations and their insurers?
  • We take a look at the practical implications

Introduction – the close connection test

The recent expansion in the law of vicarious liability has largely been in the sphere of abuse claims. However, the implications of this expansion goes far beyond solely abuse claims.  This article aims to explore these issues whilst necessarily having a focus on an organisation’s safeguarding risks.

Until 2001, the case law provided that a local authority or private institution was not vicariously liable for the actions of staff who abused a child whilst in their care. For example, a warden in a care home was regarded as authorised to care for children but abusing them was plainly not a part of caring for them because abuse was obviously not authorised by the employer. However, in 2001, the House of Lords handed down their judgment in Lister v Hesley Hall. The concept of the authorised act was replaced with a new test – an employer will be liable if the perpetrator’s acts were ‘so closely connected with the person’s employment that it would be fair, just and reasonable to hold the employer vicariously liable’.

In the circumstances of that case, if the warden of a children’s home abused children in his care then the employer was liable because, in employing him, they put him in a position where the close contact that he was given with the children through that work created a sufficient connection between the acts of abuse which he committed and the work which he was employed to do.

That test of ‘close connection’ continues to this day – as confirmed in the case of Mohamud v William Morrison Supermarkets [SC March 2016].Where, the Supreme Court found that there was a sufficiently close connection between a filling station cashier’s job of operating the garage and his actions in assaulting a customer to whom he had taken a violent dislike. The employer was duly found vicariously liable for the assault.

The Christian Brothers Case

If the ‘close connection’ test has not changed since Lister, why have the recent cases been the subject of appellate court scrutiny? The answer is that, in addition to that test, claimants now seek to bring claims against non-employees.  In Lister, employment was not an issue – the warden was contractually employed by the institution. Nor was it an issue in Mohamud, where the forecourt attendant was contractually employed by William Morrison Supermarkets plc. But, what is the position where there is no conventional relationship of contractual employment?

The Catholic Brotherhood are members of an international unincorporated association with a mission to teach unpaid. The issue of whether there was a relationship akin to employment for their voluntary teachers and therefore whether the association should pay compensation to children who were abused, was considered by the Supreme Court in 2013 in The Catholic Child Welfare Society and Others v Various Claimants, commonly known as the ‘Christian Brothers’ case.

Delivering the leading judgment, Lord Phillips noted that such a relationship should only be found when it was fair, just and reasonable, and the five criteria to evaluate that were as follows:

  1. The employer is more likely to have the means to compensate the victim than the employee and can be expected to have insured against that liability;
  2. That the tort will have been committed as a result of activity being taken on behalf of the employer
  3. That the employee’s activity is likely to be part of the business activity of the employer;
  4. That the employer has created the risk of the tort being committed;
  5. That the employee will have been under the control of the employer.

The five criteria have been accepted and applied in a number of cases since.

More recent developments

In Cox v Ministry of Justice [SC 2016], a prisoner was required to assist in the prison kitchens without pay. He dropped a bag of rice on a member of the kitchen staff, injuring her. It was plainly not a traditional employment situation, but the Supreme Court found all five criteria in ‘Christian Brothers‘ satisfied albeit amended slightly as follows:-

  1. The employer had the means to compensate, whereas the prisoner did not;
  2. The business of the prison was to keep prisoners in custody, and to care for them and feed them. That was what was happening at the time of the accident;
  3. What the prisoner was doing was part of the activity of the prison – namely organising the feeding of prisoners;
  4. The prison created the risk of the injury, by putting the prisoner to work in the kitchen; and
  5. The prisoner was under the control of the prison. What is noticeable is that the notion of ‘business activity’ was lost. The Court also stated that the first and final criteria were of less importance than the central three.

Barclays Bank

Various Claimants v Barclays Bank [2017] has highlighted another extension to vicarious liability in a new, but factually, limited area.

Here, an independent doctor was contracted by Barclays Bank in the 1980s to carry out pre-employment medical checks. He sexually assaulted some of those attending examinations. The doctor had died long before any claims were brought, and his estate distributed – there was no money left to pay damages. The question was whether Barclays Bank could be vicariously liable for the doctor’s actions?  The doctor was assisting Barclays Bank to recruit staff they needed for their business, the doctor carried out the examinations on prospective members of staff at a time dictated by the bank and Barclays created the risk, by organising the examinations. Finally, the abuse arose through the activity that the doctor had been requested to provide.

So, applying the tests from Christian Brothers and Lister, the Court held that a situation akin to employment existed, and that there was a close connection between the wrong done and the employment and decided that it was fair, just and reasonable to impose vicarious liability.

Armes

In the light of the above cases, the decision in Armes v Nottinghamshire CC [SC 2017] may be viewed as relatively unsurprising. The Supreme Court decided the case by the application of the five Christian Brothers principles as interpreted in Cox. The majority determined that it was fair, just and reasonable for foster carers to be in a situation akin to employment. They are selected and paid by the local authority and their activities are part of the statutory responsibility of the local authority in providing child care. Placing the children with the foster parents created the risk of abuse, there was control by the local authority and they have the means to compensate.  The local authority was therefore vicariously liable for the acts of the foster carers.  The court however found that placements with natural parents would not attract vicarious liability because they had a different kind of relationship with the local authority and were looking after the child on their own behalf.

Morrisons

Various Claimants v WM Morrisons Supermarkets PLC [2017] demonstrates that Vicarious Liability will be deployed by the Courts to ensure that corporate bodies are held liable for the actions of their employees “under the principle of social justice”.

In this case, a file containing personal details of 99,998 employees of Morrisons was posted on a file sharing website. Shortly after that, links to the website were also placed elsewhere on the web. The data consisted of the names, addresses, gender, dates of birth, phone numbers (home or mobile), national insurance numbers, bank sort codes, bank account numbers and the salary which the employee in question was being paid.

A group action considered the questions of whether an employer is liable, directly or vicariously, for the criminal actions of a rogue employee in disclosing personal information of co-employees on the web, whether under the Data Protection Act 1998, an action for breach of confidence, or in an action for misuse of private information.

The Court found that the DPA does not impose primary liability upon Morrisons and that Morrisons had not been at fault by breaking any of the data protection principles. However, the court held that Morrisons were Vicariously Liable for the criminal actions of their employee applying the principles of Mohamud.

Discussion

  • Undoubtedly, vicarious liability can now more easily be argued in any situation where an organization has delegated functions to another individual or organization. What is the position if, for example, a housing association uses an independent heating contractor, and one of their engineers assaults a child or alternatively, whilst undertaking repairs causes damage. If that company has been sufficiently integrated into the core activities of the housing association, through regular work and shared knowledge of systems, then vicarious liability could potentially be found. Of course, vicarious liability is primarily designed to provide redress where there is no other source of funds to provide compensation, and the Courts have reiterated that. Insurance can often exclude cover for deliberate assault, or claims can be brought many years later (as in Barclays Bank).
  • What specific concerns should Children’s Services have about care arrangements other than fostering? Any further extension would require the application of the Christian Brothers principles. Those principles would suggest that vicarious liability should not attach to the actions of full adoptive parents, as there is a final transfer of responsibilities which is court approved, nor a sufficient element of control/engagement between the authority and the new parents. Vicarious liability should not attach to placement with natural parents either. However, there are borderline situations, such as kinship placements where carers are not paid, but they are family members who have been assessed. Payment is no longer decisive, so liability may attach. Special Guardianship Orders apply to children who are both in and out of care. Where made, there is no right of supervision by the Local Authority, so vicarious liability seems less likely to attach.
  • The use of independent fostering agencies involves special considerations. The agencies recruit and train foster carers on their books, but the local authority will generally retain core decision making powers in relation to the child. This suggests that dual vicarious liability may arise. Tight contractual indemnities need to be entered into with the agency and their insurance arrangements extended to cover deliberate assaults.
  • If children in local authority care homes and in foster homes can claim against the local authority, what about those in private residential homes? The answer would depend on the specific facts of the arrangements; liability currently appears unlikely to attach but that may change. Will future claims involving private homes allege vicarious liability on the part of the placing local authority? Again, ensuring that the home has insurance cover for deliberate assaults/ criminal acts of staff is essential.
  • Acts of charity volunteers present an area of potential liability, given Cox, if the volunteers are integrated into the activity of the charity. Those say, staffing a cake stand on a one off basis are less likely to be integrated, but a regular volunteer could be. Most charities now carry out criminal records checks which goes, to some extent, to manage the risk. This practice may need to be widened so that costs again will increase but, if it prevents abuse, then that is arguably a justifiable cost to society.
  • Criminal acts of occupational health providers may be held to be the responsibility of the employer who has requested a health review of staff. But, such medical staff are now likely to be part of a large organisation and insurance to cover deliberate acts by their staff should be required. Police forces traditionally use General Practitioners as custody doctors, and a similar situation to that in Barclays could arise, whereby abuse takes place, but the medical practitioner involved has no effective cover (deliberate acts being excluded or simply not covered. The same situation could arise with school nurses.
  • These court decisions may have an effect on the independent musician or coach, who provides services at schools and colleges. Their work involves spending time alone, and making physical contact with young people. Vicarious liability is likely to attach to the educational establishment if they commit abuse. They will require bespoke insurance cover to guard the establishment from claims.
  • Remember too, that the decisions may have an impact beyond the sphere of sexual abuse. So, if the Local Authority is liable for abuse committed by a foster carer, they are logically liable for their acts of negligence, too. That would cover general neglect or physical assaults. For example, if a foster parent negligently fails to supervise the child in their care and they suffer injury, then the Local Authority may be vicariously liable for those failings.Potential Actions Organisations are encouraged to review their practices and procedures where liabilities for the actions of their employees, volunteers and or contractors may exist. As can be seen from the cases discussed above, the potential liability is ever expanding. Steps to review may include:
  • Record keeping – Record keeping is vital. Careful archiving of documentation is important particularly, where work is assigned to contractors or volunteers. Contractor / volunteer selection will become increasingly important. Using credible, well established contractors who can show good risk management and who have clearly defined contracts setting out apportionments of liabilities is vital. Accordingly, certificates of insurance provided by contractors, and terms of engagement and contractual indemnities entered into with them, is essential. Companies should work closely with their Data Controller and Data Protection Officers to Risk Assess the documentation that is to be retained and to set a suitable retention policy. Should you require further information and support, please liaise with your Risk and Insurance Consultant who will be happy to assist.
  • Recoveries – The issue of Recoveries against offenders and/or negligent employees / contractors will become a greater issue, as the number of settled claims rises. Early settlements will need to be considered and recoveries pursued thereafter. Insurers and the insured will need to work closely when considering recoveries and, potential reputational risks arising from recoveries. It will be important to identify early in any claim, whether the employee/volunteer or contractor has assets to satisfy any settlement e.g. Pensions, Property, Insurance cover and/or savings. Those parties will need to be joined into proceedings at the earliest possible opportunity and where possible encouraged to take over conduct of the claim.
  • Reporting Allegations of Abuse – Careful risk management of early reports of abuse should also be considered – such as mandatory reporting to the police by the Insured. This protects future victims and may assist in securing the alleged offenders assets. Organisations may wish to develop specific policies in this regard.
  • Risk Assessments of Business Activities – Authorities must risk assess work situations and in particular where employees/contractors are lone working. When using lone working Insured’s should consider whether there is a safeguarding risk, satisfying themselves that contractors have robust risk management processes in place and ensuring contracts reflect this. Should, for example, our hypothetical heating engineer be accompanied if working in a care home, and there is assessed to be a risk of abuse of residents? Terms of engagement would be required to be amended to cover such situations and service costs would inevitably rise.
  • Insurance Arrangements – It is increasingly important that organisations ensure that they have appropriate Public Liability Insurance in place. Zurich’s public liability policies will respond to pay damages on the part of our insured whether that liability is directly incurred by the insured or attracts vicarious liability for the actions of their employees, contractors or volunteers[1].

Summary

The ambit of vicarious liability has been extended considerably over many years by the courts. This is partly in recognition of the fact that the traditional models of employment are changing but also because a number of situations involving victims of assault have recently come before the courts, where, if the law had not changed, victims would be without redress.

The most significant extension of Vicarious Liability can be seen in the decision Barclays and Armes because it allows a distinctly definable and potentially large categories to claim namely, those who suffer damage as a result of the negligent action of a contractor appointed by the Insured or those who have been abused by foster carers, contractors or volunteers. Admittedly, claims from those injured by long deceased doctors carrying out employment checks, are more limited in number. However, these decisions mean that others in factually related situations may be able to claim compensation, as the law extends. The law has not necessarily stopped moving given the current approach of the Supreme Court and the expansion of liability, rather than contraction, seems the most likely route.

Whilst this extension of vicarious liability presents further liability risks to your organization, there are things you can do to mitigate these risks and we have briefly touched on some of them in this article. Zurich Insurance employ strategic and operational risk management experts who can support you assess and successfully manage the risks associated with your own organisation’s activities, and we have experts who can review your insurance arrangements in light of these important decisions.

[1] Subject to the normal policy terms and conditions.