What it means
When a claim arises from careless driving, a defective product or a false statement, the claimant is the one who was harmed and the tortfeasor is the one who caused it. The label is used by lawyers, insurers and claims handlers to keep track of who owes what.
A tortfeasor can be an individual, a company or even a public body. Companies are tortfeasors in their own right when their systems or products cause harm, and they can also be responsible for the acts of their employees under vicarious liability, which makes an employer answerable for staff acting in the course of their job.
Many incidents involve more than one tortfeasor, for example a building owner, a contractor and a supplier all contributing to an accident. In some legal systems they are jointly and severally liable, which means the injured party can recover the whole amount from any one of them, who must then try to recover a fair share from the others.
For finance, the identity and solvency of the tortfeasor matter a great deal. If the tortfeasor is another business, a claim against it is a potential receivable only when recovery is virtually certain, and if the tortfeasor is your own company, the claim is a possible liability that must be provided for or disclosed.
Insurance is the main way businesses protect themselves from this role. Public liability, professional indemnity and product liability policies pay for claims made against the insured as tortfeasor, up to the policy limit and after any excess.
Fault is not always required. In some areas, such as defective products or hazardous activities, strict liability can make a party a tortfeasor even where it was not careless, so businesses should not assume that taking reasonable care is a complete defence.
In practice
Real-world examples.
Example
A building contractor's crane drops materials onto a neighbouring shop and closes it for a month. The contractor is the tortfeasor, and its insurer pays the shop's lost takings of $60,000 plus repair costs.
Example
A courier company's driver, rushing to meet a deadline, hits a parked car. The driver is the immediate tortfeasor, but the courier company is also liable as employer, and its fleet insurance covers the $14,000 repair bill.
Example
A consulting firm shares a client's confidential figures with a competitor by mistake. The firm is the tortfeasor for the loss that follows, and the client's claim sits alongside its contract rights under the engagement letter.
Case study
Seen in the real world.
Ironbridge Events is an illustrative, fictional company that organised a conference at which a poorly secured stage backdrop fell and injured two visitors. Three businesses were involved: Ironbridge, the venue owner and the contractor who built the structure.
The claimants sued all three, and the court indicated that each was a tortfeasor and that liability was joint and several. Ironbridge's insurer paid the full $350,000 settlement up front, then recovered 40% from the contractor and 20% from the venue under a contribution claim.
The illustrative outcome left Ironbridge bearing 40% of the cost, or $140,000, which was within its insurance limits. The finance team learned to check that all subcontractors held adequate liability cover, because the ability of other tortfeasors to pay can decide how much your own business ends up bearing. Afterwards the group introduced a standard clause in its supplier contracts requiring each contractor to hold liability insurance of at least $5,000,000 and to name Ironbridge as an additional insured party. Procurement now collects the insurance certificates before work begins, and finance diarises their renewal dates so that no supplier is working uninsured.
Watch out
Common mistakes.
- Assuming that the tortfeasor is always the person who physically caused the harm, when employers, principals and product makers can also be responsible.
- Ignoring co-tortfeasors, and so failing to seek a fair contribution from others who share the blame.
- Recording an expected recovery from another tortfeasor as an asset before it is virtually certain, which overstates profit.
Questions
People also ask.
Can a company be a tortfeasor?
Yes, a company is a legal person and can be liable for its own actions as well as for the acts of its employees.
What does joint and several liability mean for a tortfeasor?
Each party can be asked to pay the whole claim, and the one who pays may then pursue the others for their share, so the risk of another party's insolvency can fall on the solvent ones.
Does a tortfeasor always have to pay in full?
Not necessarily, because courts can reduce the award where the injured party also contributed to the harm, a principle often called contributory negligence.
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