A recent House of Lords decision has significantly changed the law of vicarious liability, with far-reaching implications for those operating in the care industry, their insurers and, as a consequence, insurance brokers.

In Lister and others vs Hesley Hall (May 3, 2001) the House of Lords decided to go “back to basics” and remind us of the traditional principles of the law on vicarious liability. But in doing so, it introduced a slant that significantly broadens the circumstances in which employers are vicariously liable for the acts of their employees.

The claimants had been residents at a school owned and managed by the defendant (advised by Beachcroft Wansbroughs). They had been systematically abused by one of the defendant's employees, Grain, who had been employed by the defendant as a house parent.

The claimants sought to recover damages. At issue was not whether the defendant was negligent or in breach of duty, but whether it was vicariously liable for the acts of its employee.

Question of authorisation
At first instance the trial judge dismissed the case in negligence and found that the defendant could not be vicariously liable for Grain's criminal acts, following the Court of Appeal decision in ST vs North Yorkshire County Council (July 14, 1998).

The judge did, however, draw a distinction between Grain's state of mind while carrying out the abuse and his conduct thereafter. It was agreed that Grain, as a house parent, was in loco parentis and therefore had a duty of care to report harm (actual or potential) caused to the claimants. The trial judge found the defendant vicariously liable for Grain's failure to report the harm. The defendant appealed.

The Court of Appeal disagreed and followed the long-established principle that criminal acts (such as assault) should be interpreted as unauthorised acts, not sufficiently connected with an authorised mode of carrying out an authorised act. The claimants appealed.

One of the first questions asked by one of the lords of the claimants' counsel was: “Can this case be decided on orthodox principles of vicarious liability?” The answer: yes. The lords unanimously found that ST vs North Yorkshire County Council was wrongly decided and that a broad approach should be adopted in considering the question of scope of employment.

Attention must be focused on the nexus between the act of the employee and the duties (broadly defined) that he or she is engaged to perform. Grain had abused the special position in which he was entrusted and therefore the defendant was found vicariously liable for his acts, even though they were criminal.

Far-reaching implications
The decision substantially expands the circumstances in which employers (and therefore employers' liability insurers by indemnity) can be fixed with vicarious liability for the acts of employees. It is likely to be of particular concern to organisations (whether governmental or otherwise) that have care for the young or vulnerable.

Brokers operating in this market area should therefore consider drawing this decision to the attention of their clients and, in particular, those responsible for boarding schools, nursing or old peoples' homes, prisons and the health service. The implications of this decision are likely to be far-reaching and it will take time to digest its full impact.

  • Jeremy Riley is an insurance lawyer, based at the Manchester office of Beachcroft Wansbroughs.

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