Torts and negligence

A tort is a civil wrong, other than a breach of contract, for which the law gives a remedy, usually damages. Contract duties arise from agreement; tort duties are imposed by law on everyone. A business can commit torts through its employees and products, and it can be the victim of torts committed by competitors, customers and others. Tort claims are among the largest legal risks most businesses face: a single serious injury on business premises or caused by a delivery vehicle can produce a claim worth millions. This lesson covers intentional torts, the tort of negligence, liability for premises, professional negligence and vicarious liability. Lesson 7 covers torts aimed at business interests and product liability.

Intentional torts

Intentional torts involve deliberate conduct, although the defendant need not intend harm. Several arise in everyday business. Battery is intentional, harmful or offensive physical contact without consent; assault is causing someone to fear imminent contact. False imprisonment is intentionally confining a person without lawful authority, which is a real risk when store staff detain suspected shoplifters. Trespass to land is entering or placing things on land without permission. Conversion is wrongfully dealing with another's goods, such as refusing to return them or selling them. Nuisance is an unreasonable interference with a neighbor's use and enjoyment of land, such as noise, odors, vibration or dust from a business operation.

Most states give merchants a shopkeeper's privilege: a merchant who has reasonable grounds to believe a person has shoplifted may detain the person in a reasonable manner and for a reasonable time to investigate. Detentions that are based on weak suspicion, last too long, involve excessive force or humiliation, or continue after the suspicion is dispelled expose the store to damages for false imprisonment, assault, battery and defamation, sometimes with punitive damages. Many retailers therefore train staff to observe and report rather than detain.

The tort of negligence

Negligence is the most important tort for business. It covers careless, rather than deliberate, conduct that causes harm. The modern law of negligence grew from Donoghue v. Stevenson (1932), in which a woman became ill after drinking ginger beer from an opaque bottle that allegedly contained the remains of a decomposed snail. She had no contract with the manufacturer, because her friend bought the drink. The House of Lords held that the manufacturer owed her a duty of care, because Lord Atkin's neighbor principle requires people to take reasonable care to avoid acts or omissions that they can reasonably foresee would be likely to injure persons so closely and directly affected that they ought to have them in contemplation.

A plaintiff in an American negligence action must generally prove four or five elements by a preponderance of the evidence: the defendant owed a duty of care, the defendant breached it by failing to act as a reasonable person would, the breach was a cause in fact of the harm, the breach was a proximate (legal) cause of the harm, and the plaintiff suffered actual damages. Negligence is state common law, so details vary from state to state, and the Restatement (Third) of Torts is influential.

Duty. Everyone owes a general duty to act with reasonable care to avoid foreseeable harm to others. Courts limit duty in special categories, such as failures to act (there is generally no duty to rescue a stranger unless a special relationship exists, as between a business and its customers), purely economic losses and emotional distress without physical injury. In Palsgraf v. Long Island Railroad Co. (1928), railway guards helped a passenger board a moving train and dislodged a package of fireworks, which exploded; the shock allegedly knocked over scales at the far end of the platform, injuring Mrs. Palsgraf. Judge Cardozo held that the railway owed her no duty because no harm to her was foreseeable from the guards' conduct: duty is owed to foreseeable plaintiffs.

Standard of care. The defendant must act as a reasonable person would in the circumstances. Courts consider the likelihood of harm, the severity of potential harm, the cost of precautions and the social value of the activity. Industry customs and regulatory standards are evidence of reasonable care but not conclusive: complying with a safety regulation does not automatically show the defendant was careful, and breaching a statute is evidence of negligence. Professionals are held to the standard of a reasonably competent member of the profession, and people who hold themselves out as having special skills must meet that higher standard.

One way to think about the standard is the Hand formula, from Judge Learned Hand's opinion in United States v. Carroll Towing Co. (1947): a defendant is negligent if the burden of a precaution (B) is less than the probability of the harm (P) multiplied by the gravity of the loss (L). Canadian and American courts do not apply the formula mechanically, and it is hard to quantify human injury, but it captures how courts weigh risk against the cost of avoiding it, and it is a useful tool for business risk decisions.

Causation. The plaintiff must show cause in fact, usually that the harm would not have occurred but for the defendant's conduct; where several causes combine, courts ask whether the defendant's conduct was a substantial factor. The plaintiff must also show proximate cause: the harm must be a foreseeable result of the risk that made the conduct negligent, without a superseding intervening cause. Under the eggshell plaintiff rule, once some harm is foreseeable, a defendant takes the plaintiff as it finds them and is liable for the full extent of injury even if it is unusually severe because of a pre-existing condition. Where the plaintiff cannot prove exactly what happened but the accident is of a kind that ordinarily does not occur without negligence and the defendant controlled the instrument, the doctrine of res ipsa loquitur (the thing speaks for itself) lets the jury infer negligence.

Defenses to negligence

Most states use comparative negligence to reduce a plaintiff's recovery by its share of fault. In pure comparative negligence states, such as California and New York, a plaintiff who is 70 % at fault still recovers 30 % of its damages. In modified comparative negligence states, the majority, a plaintiff recovers only if its fault is less than the defendant's (50 % bar) or not greater than the defendant's (51 % bar). A few jurisdictions, Alabama, Maryland, North Carolina, Virginia and the District of Columbia, keep the harsh rule of contributory negligence, under which any fault by the plaintiff bars recovery. Assumption of risk can be express, such as a signed waiver, which courts enforce if clear and not against public policy, or implied, where the plaintiff knowingly encountered an inherent risk, such as being hit by a ball at a baseball game. States differ on joint and several liability; many have limited it so that defendants pay only their share of non-economic damages.

Premises liability

Owners and occupiers of land owe duties to entrants that, in many states, depend on the entrant's status. Invitees, including business customers, are owed reasonable care, including inspecting for and fixing or warning of dangers the owner knows of or should discover. Licensees, such as social guests, are owed a warning of known dangers. Trespassers are generally owed only a duty not to injure them willfully or wantonly, with greater protection for children under the attractive nuisance doctrine. Some states, following Rowland v. Christian (California, 1968), have replaced the categories with a single standard of reasonable care. In slip-and-fall cases, the plaintiff typically must show that the business created the hazard or had actual or constructive notice of it, meaning it existed long enough that reasonable inspection would have found it, which is why inspection logs matter so much.

Professional negligence and negligent misstatement

Professionals such as accountants, engineers, lawyers, architects and financial advisors owe their clients duties in both contract and tort. Liability to third parties for negligent misrepresentation causing purely economic loss is limited. In Ultramares Corp. v. Touche (1931), Judge Cardozo held that auditors were not liable to a lender that relied on a negligent audit, warning of liability in an indeterminate amount for an indeterminate time to an indeterminate class. States now follow one of three approaches: the strict privity or near-privity approach of New York, the Restatement (Second) of Torts section 552 approach used by most states, which extends liability to a limited group of persons the professional knows will rely on the information for a particular transaction, and a broader foreseeability approach used by a few states. Securities laws add separate statutory liability for misstatements in offering documents and public filings.

Vicarious liability

Under the doctrine of respondeat superior (let the master answer), an employer is vicariously liable for torts committed by employees within the scope of employment, even if the employer itself was not at fault. Conduct is within the scope if it is the kind of work the employee was hired to do, occurs substantially within authorized time and space limits and is motivated at least in part by a purpose to serve the employer. A minor detour on a delivery route is usually within the scope; a frolic of the employee's own is not. Intentional torts are within the scope if they are connected to the job, such as a bouncer's excessive force. Employers are not generally liable for independent contractors, which is one reason worker classification (lesson 10) matters. An employer may also be directly liable for negligent hiring, retention, training or supervision.

Damages in tort

Tort damages aim to restore the plaintiff to the position it would have been in had the tort not occurred. Economic damages cover past and future lost earnings, medical costs and property damage; non-economic damages compensate for pain, suffering and loss of enjoyment of life; and punitive damages may be awarded for malicious, oppressive or recklessly indifferent conduct, subject to due process limits. Juries set many awards, which makes outcomes less predictable than in countries where judges decide most cases. Many states have enacted tort reforms, such as caps on non-economic or punitive damages, especially in medical malpractice cases, and limits on joint and several liability. Workers' compensation statutes make no-fault benefits the exclusive remedy against the employer for most workplace injuries, and about a dozen states use no-fault automobile insurance that limits lawsuits for minor injuries.