What it means
A tort is a civil wrong, as opposed to a crime, that gives the injured person the right to claim money damages. Intentional torts involve deliberate harm, while an unintentional tort arises from carelessness or from an activity that carries risk.
The key point is that a person can be held responsible even though they never wanted anything bad to happen. In most cases the injured person must show four things: a duty of care was owed, the duty was breached, the breach caused the harm, and real loss followed.
The standard is usually what a reasonable person would have done in the same situation. A shop owner who leaves a wet floor unmarked, or a driver who looks at a phone, may fall below that standard.
Businesses face unintentional tort claims through their staff, premises, products and services. An employer is often responsible for harm caused by employees acting within their job, a principle known as vicarious liability.
Professional firms face a related risk through advice that is wrong or careless, which is covered by professional indemnity insurance. Damages are meant to put the injured person back in the position they were in before the harm, as far as money can do that.
They cover medical costs, lost income, property damage and sometimes pain and suffering. Courts may reduce the award if the injured person also contributed to the harm, a rule often called comparative negligence.
A different category is strict liability, where a person can be liable even without carelessness, for example in some product defect cases. This is related but not identical, because negligence turns on lack of care while strict liability turns on the activity or product itself.
Legal advice is needed to see which applies in a given situation. Prevention is where the finance function can add the most value, because liability claims are costly and slow to resolve.
Regular safety inspections, written procedures, staff training and good records of maintenance all show that reasonable care was taken. They also help to keep insurance premiums under control, since insurers price cover according to the quality of risk management.
In practice
Real-world examples.
Example
A supermarket cleaner mops an aisle and forgets to put out a warning sign. A customer slips and breaks a wrist, and the supermarket's liability policy responds to the claim for medical costs and lost earnings.
Example
A software consultant gives incorrect advice on configuring a payment system, causing a client to overpay tax by $30,000. The client sues for the loss, and the consultant's professional indemnity policy handles the claim.
Example
A delivery driver employed by a bakery runs a red light and damages a parked car. The bakery is responsible for the employee's actions during work and its commercial auto insurer pays for the repair. The owner of the damaged car does not need to prove that the baker personally was careless.
Case study
Seen in the real world.
Sandalwood Fitness is an illustrative, fictional chain of gyms. One of its branches left a damaged weight rack in use for several weeks after staff had reported the problem twice.
When the rack collapsed and injured a member, the injured person sued. The claim depended on whether the gym had acted as a reasonable operator would, and the internal reports showed that it had known of the danger and done nothing.
The illustrative claim settled for $180,000, partly covered by insurance and partly by the company, and the gym introduced a weekly inspection log with a rule that damaged equipment is removed the same day. The lesson is that records of known hazards can turn an accident into evidence of carelessness. Its premium at the next renewal fell by about $12,000 after the insurer reviewed the new log and the training records.
Watch out
Common mistakes.
- Assuming there is no liability because nobody meant to cause harm, when negligence needs only a failure to take reasonable care.
- Thinking an unintentional tort is a crime, when it is a civil wrong decided on the balance of probabilities rather than beyond reasonable doubt.
- Believing that insurance removes the need for safety processes, when insurers expect reasonable care and may refuse claims involving serious neglect.
Questions
People also ask.
What is the main example of an unintentional tort?
Negligence is the most common example, covering careless acts that cause injury or loss to others.
Can a company be liable for an employee's mistake?
Often yes, because an employer is generally responsible for harm caused by staff acting within the scope of their jobs.
How is the amount of damages decided?
Courts look at the actual losses such as medical bills, income lost and property harmed, and may adjust the award for the claimant's own share of the blame.
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