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Add. Case: Larson v. Wasemiller (Sup. Ct., Minn., 2007)--Larson had surgery at a hospital in
Minnesota. Due to complications, she had to have a second surgery by the same surgeons. That
was not successful and she needed more surgery. She was hospitalized for two months. She sued
the surgeons for malpractice and sued the hospital for the tort of negligent credentialing, arguing
that the hospital can be liable based on vicarious liability for the negligence of employees as it
violates its duty to exercise reasonable care in the provision of health services. After complicated
proceedings, the question before the Minnesota high court was if the state recognized the tort of
negligent credentialing.
Decision: Minnesota recognizes the tort of negligent credentialing, so Larson’s case may proceed.
The factors to be considered include 1) whether the tort is inherent in, or the natural extension of, a
common law right, 2) whether the tort has been recognized in other states, 3) whether recognition
of a cause of action will create tension with other relevant laws, and 4) whether such tension is
outweighed by the importance of the additional protections that recognition of the claim would
Issue Spotter: Use of Company Cars
As with many other things, companies need firm policies about the use of company vehicles. The
policy, such as absolutely no use of company vehicles except during working hours and going to
and from work, must be strictly and consistently enforced. If it is selectively enforced, that would
be evidence that the company did not really have a policy prohibiting personal use, which would
defeat the defense. Put more of the burden on employees to be responsible and they will be more
careful, but not all accidents can be prevented. If employees cannot use cars for any personal use,
they will rebel at not being able to stop by the bank when they are driving by it, or dropping a kid
off at school on their way to work. Some companies give employees a car at a significant discount
so they use it for work purposes, and require the employee to carry insurance, but make it the
employee’s duty to provide their own transportation. No one model dominates.
Vicarious Liability— Under this doctrine, a principal will have ordered an agent to undertake the
tortious act. In this way, the agent is acting on behalf of the principal. Courts may consider several
factors in determining whether an act was within the scope of employment. Some of the factors
are:
1. Whether the act was of the same general nature of those authorized by the principal.
2. Whether the agent was authorized to be in the location at the time the act occurred.
3. Whether the agent was serving the principal’s interests at the time of the tort.
Respondeat superior is a doctrine holding the principal liable if an agent’s tortious act was not
ordered by the principal but occurred within the scope of the agent’s employment. This has been
justified on the grounds that the principal is in a better position to protect the public from such torts
(through careful selection of agents) and to compensate those injured (through insurance).
CASE: Armstrong v. Food Lion Sup. Ct., S.C., 2006)—Armstrong and his mother were shopping
at a grocery store. They were attacked by three employees who had a dispute with Armstrong from
before. The Armstrongs sued the store; the lower courts dismissed. They appealed.
Decision: Affirmed. Food Lion is not liable based on respondeat superior. That applies when the
employee is acting on behalf of the employer within the scope of employment. That was not the
Questions: 1. The high court held that the attack by the employees on customers would not result
in liability for the employer, as the acts of the employees were not related to business. What if the
employees had criminal records? Should employers place ex-felons in contact with the public?
Background checks can be costly as state criminal records are not easily accessed around the
nation. This encourages more employers to do more background checks of all prospective
2. Suppose a Food Lion employee carelessly dumps a heavy box on a customer and injures the
customer. Would liability likely be imposed in that case?
Yes, while the act of the employee was accidental, it was negligent and was performed in the
Add. Case: Read v. Scott Fetzer Co. (Sup. Ct., Tx., 1998)—Fetzer d/b/a Kirby vacuums. It sells
via distributors who hire door-to-door sales forces to do in-home demonstrations and sales. Sena,
a Kirby distributor in San Antonio, hired Carter to be a sales rep, called a dealer. The dealers
signed independent contractor agreements. Carter sexually assaulted a customer, Read, in her
home. She sued Sena and Kirby for negligence. The jury apportioned negligence: 10% Read, 10%
Sena, and 80% Kirby. $160,000 damages plus $800,000 punitives. Kirby appealed.
Decision: Affirmed. Sena and Kirby did not do a background check on Carter, who had a record of
sexual problems. The claim that Carter is an independent contractor, so they should not be
Add. Case: Commercial Business Systems v. BellSouth (Sup. Ct., Va., 1995)--BellSouth
awarded CBS a two-year contract to repair equipment. Jordan, a BellSouth employee,
administered the contract. He was satisfied with CBS’s performance and said it could expect
renewal. Waldrop replaced Jordan as administrator. Waldrop also administered a repair contract
with Halifax. Its performance was poor, but Waldrop continued to use it. He made statements
about CBS’s problems that were false. Waldrop wrote CBS that its contract would not be renewed
in order to offer BellSouth clients the “best in quality and service” by “opening that market to
other qualified vendors.” Waldrop gave Halifax a contract to repair more equipment at a higher
price.
Waldrop violated BellSouth’s conflict-of-interest rules. He had a personal company to take bribes
from Halifax in the guise of “transactions” between Halifax and his company. BellSouth fired
Waldrop and canceled its contract with Halifax. CBS sued BellSouth because Waldrop awarded a
contract to CBS’s competitor, Halifax, in exchange for bribes. CBS sought to recover lost profits
and punitive damages against BellSouth claiming that tort liability should be imputed to BellSouth
under the doctrine of respondeat superior. Court granted summary judgment in favor of BellSouth.
CBS appealed.
Decision: Reversed. The evidence presented a jury issue whether Waldrop acted within the scope
of his employment when he committed the wrongful acts. When an agency relationship exists, the
burden is on the principal to show that the agent was not acting within the scope of employment
when the acts were committed. If evidence leaves the question in doubt, it is an issue for the jury.
Add. Case: McLoud v. Kimbro (Ct. App., Ariz., 2010)--Kimbro, an Ariz Department of Public
Safety (DPS) officer, was working in Sierra Vista on assignment from Phoenix. After his shift, he
was driving to a restaurant when he carelessly ran into the back of a car that was stopped. The
driver he hit filed an administrative claim against the state but did not sue Kimbro until more than
one year after the accident. Under Arizona law, there is a one-year statute of limitations for
actions filed against state employees. The district court dismissed the suit due to the statute of
limitations. McCloud appealed, contending that the suit was against Kimbro personally, not in his
capacity as a state employee, so a longer statute of limitations applied and the suit could proceed.
The issue then was whether Kimbro was acting within the scope of his employment at the time of
the accident.
Decision: Affirmed. For purposes of an employer's vicarious liability, an employee's conduct is
within the scope and course of employment only if: 1) it is the kind he is employed to perform, 2) it
Add. Case: Taylor v. Roseville Toyota (Ct. App., Calif., 2006)--Lewis, an employee of Roseville Toyota, was driving
a Roseville car on a personal errand during his lunch break when he rear-ended another car that stopped for a red
light. The occupants of the other car sued Lewis and Roseville for their injuries. The jury found Lewis to be negligent
and while he was not acting in the scope of his employment, he was using the car with permission of Roseville, which
was found liable for $277,662 in damages. Roseville appealed.
Decision: Affirmed. The fact that a vehicle owner either failed to monitor or supervise the use of its vehicles is a factor
in determining implied permission for someone to use the vehicle. Lewis testified that the employee who controlled
Negligent Hiring—As a rule, the principal is not liable for the torts of an agent when the tort is
both unauthorized and outside the scope of employment. In such cases, the agent alone is liable to
the wronged party. Employer is not liable for the torts of an independent contractor, and an
independent contractor cannot enter into business relationships on behalf of the employer.
Employers do have an obligation to weed out potential employees who would be unfit in particular
circumstances, such as perverts working at a child care center.
Add. Case: Diaz v. Carcamo (Ct. App., Alif., 2010)-- Carcamo was driving truck for his employer,
Sugar Transport. When Tagliaferri tried to pass Carcamo, the rear of her car hit Carcamo's front
tire, causing Tagliaferri to lose control. Her car when over the median and landed on top of Diaz's
car that was coming in the opposite direction. The jury awarded Diaz $22.5 million in damages;
apportioned 45% of fault to Tagliaferri, 20% to Carcamo, and 35% to Sugar Transport. It was
held vicariously liable for its negligent hiring and retention of Carcamo. Sugar appealed,
contending that while it is vicariously liable for Carcamo's driving on a theory of respondeat
superior, there should have been no claim for negligent hiring and retention.
Decision: Affirmed. Negligent hiring and retention are theories of liability independent of
vicarious liability. That is, the liability comes from hiring and retaining an employee who is
incompetent or unfit. Not only is the employer responsible on the theory of vicarious liability for
Add. Case: Lisa A. v. Henry Mayo Newhall Memorial Hosp. (Sup. Ct., Cal., 1995)--Lisa M.
(age 19 and pregnant) went to the emergency room for an examination after a fall. She was
sexually molested by a technician using ultrasound equipment to check for possible damage to her
fetus. She complained. The technician was convicted of a felony charge from her complaint. Lisa
sued the hospital. Court granted summary judgment to the hospital; appeals court reversed based
on vicarious liability under the doctrine of respondeat superior. Hospital appealed.
Decision: Reversed. Hospital is not vicariously liable. “An employer is vicariously liable for the
torts of its employees committed with the scope of the employment. ...an employee’s willful,
malicious and even criminal torts may fall within the scope of employment ... even though the
Add. Info.: Crime and the Agency Relationship: To what extent should principals be responsible
for the crimes of their agents? Absent legal guidelines and industry standards, companies are not
required to make checks into criminal records when hiring a person. On the one hand, courts have
imposed a duty on companies to reduce the risk of crime by their employees if it is within their
control to do so. On the other hand, it is in the public interest not to impose unreasonable costs on
employers by making expensive criminal record checks on all potential employees. However, the
costs of lawsuits might force businesses to make such checks.
Discussion Question
If an agent steals form a principal and uses the money to buy a car, the agent violates the duties of
loyalty, obedience, performance, and accounting. The principal owns the car.
Case Questions
1. Zimmerman was an agent for both the buyer and the seller. As such he had a duty to both
parties. As it turns out, his commission for making the deal was a $5,000 interest in the property
and a share of profits if the property were resold under certain conditions. This is not illegal, but
Zimmerman violated his fiduciary duty as an agent to disclose his financial interests to his
2. (answer on Internet for students) Hubco was a dealer for MAI, but their relationship was
contractual, not agency. Agency “does not mean that an agency relationship exists every time one
party has a contractual right to control some aspect of another party’s business.” The “dealership
agreement gave MAI some degree of control over the manner in which Hubco handled MAI
3. Martin is personally liable. He failed to disclose to Independent that he was no longer the
principal for Martin’s Appliance as he had sold the business to Struthers’ and was now the manager
4. (Answer on Internet for students) Guardsmark is not liable. There was nothing in Kadah’s
background or job record to indicate any problem. It was not responsible for supervising his every
move while he was on duty, so if he was found guilty, that did not impute responsibility to his
5. Yes, the brokers were acting with apparent authority. When they were hired, the company sent
customers letters telling them they had been hired and some customers accounts were assigned to
6. (answer on Internet for students) The appeals court held it was for the jury to decide if National
was liable in tort on the theory of vicarious liability. “A master is liable for the negligence of his
servant if at the time of the negligent act the latter is acting within the scope of his employment,
7. The court held that the employer did not owe a duty to Valeo, so there was no negligent hiring
claim. The incident was not in the control of the employer. However, Neering claimed Valeo tried
to jerk him out of the truck and he was afraid Valeo was trying to steal the truck, which is why he
8. Meyers has no case. He asserted there was a public policy exception to the at-will rule for
9. The travel agency may be called an agency, but the tour operator in Peru was not an agent of the
Florida company. There was no negligence on the part of Worldwide. It did not control the actions
Ethics Question:
Clarence was convicted of a crime involving violence against persons and the taking of others’
property. If we exclude people from consideration in employment based on who may be at risk
because their past behavior is presumed a predictor of their future behavior, then there is not much
Essay Questions from Cases:
Elliott contracted with the Army to install a freezer at Fort Bliss, Texas. The contract required Elliot to install the
freezer and provided that Elliott was “fully responsible for the actions of all employees and contracted representatives”
and that Elliott would indemnify the Army for damages “and injury to person or property proximately caused by action
or inaction attributable” to Elliott. Elliott subcontracted with Lingle to install the unit, which was done. Later, the
Army hired IAS to do some construction work. When IAS employee Diaz was installing a sink, a panel from the
Elliott freezer, installed by Lingle, fell and injured Diaz, who sued Elliott for negligence. The trail court dismissed the
suit, but the appeals court reversed; Elliott petitioned the Texas high court for review. What controls here—contract
law, tort law, or agency law?
Answer: Reversed. The intent of the contract between the Army and Elliott was to require the
seller to be fully financially responsible for any claims against the Army arising out of actions of
the seller or its contractors, not to require Elliott to retain control over the freezer installer (Lingle),
While working for Lubrizol Corporation, Occhionero was injured by a fellow employee, Edmundson, who assaulted
Occhionero. Occhionero sued Lubrizol on the basis of respondeat superior —“the legal theory that an employer is
derivatively responsible for the torts of his employee committed within the scope of employment.” The trial court
dismissed the suit; Occhionero appealed. Could Lubrizol be liable? [Occhionero v. Edmundson, 2001 WL 314821, Ct.
App., Ohio, (2001)]
Answer: Reversed. The two causes of action are different. To sue an employer for intentional tort,
the employee must plead “that the employer: (1) specifically desired to injure the employee; or (2)
knew that injury to the employee was substantially certain to result from the employer’s act.” This
pleading is more difficult to establish than is the case of respondeat superior. Occhionero alleges
When Norton was hired in 1978, he signed an “Employment Agreement” that stated that his employment could be
terminated at any time. Several years later, his employer issued a “Work Rule Policy and Handbook” that established
policies for discipline and dismissal. Steps for notifying an employee about unsatisfactory performance were
described. Norton was fired in 1989, because his boss was unhappy with sales in the office that Norton ran. Norton
sued for violation of his employment contract, because the company did not follow the steps in the handbook. A jury
awarded him $305,000 in back pay for breach of contract. Was the award upheld on appeal, or was Norton an at-will
employee? [Norton v. Caremark, 20 F.3d 330, 8th Cir. (1994)]
Answer: The decision was affirmed. Once the handbook was issued, the discipline procedures it
outlined were to be followed. Before termination, verbal warnings and written warnings were to be
given and a written performance program was to be given to the employee. These procedures were
Internet Assignment
Look at these websites for useful information on practical aspects of agency and employment
relationships.
Susan M. Heathfield, About.com: Human Resources. http://humanresources.about.com/
Employment Law Information Network: www.elinfonet.com
For a short discussion of practical employment at will issues, use those keywords at the
About.com: Human Resources website. The Employment Law Information Network has a large
amount of relevant information related to many of the topics covered in this chapter.
