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Home > Blog > What Determines if You Are Legally Liable for a Mistake in Your Business
WEDNESDAY, SEPTEMBER 12, 2018

What Determines if You Are Legally Liable for a Mistake in Your Business

A small to medium business can suffer significant financial loss when employees make mistakes. Knowing when you are liable for these mistakes is essential. Your general liability insurance can help cover them, but understanding your liability itself is essential. When is your company financially responsibleimage of business owner dealing with risk management for these types of mistakes?

Generally, You Hold Responsibility

Most employers are responsible for the actions of their employees. This is because employers direct the behaviors and actions of employees. When the employee makes a mistake, then, the employer could be to blame.

When someone suffers a loss because of the employee’s actions or inaction, the employer often holds responsibility. However, there are some instances in which there are limits to this. One key fact to remember is that the employer is responsible while the employee is acting during the course of employment. This means the employee has authorization from the employer to be conducting the acts that lead to mistakes.

What Is “Detour” or “Frolic” in This Context?

The problem many employers have is that they cannot control employees all the time. But, it is your job to ensure the employee is capable of handling the situation. In some cases, it is important to determine the difference between a job-related accident and one in which the employee caused an accident unrelated to his or her job. In some legal cases, a judge will rule that the employee was not acting on behalf of the employer. This is sometimes a detour or frolic incident.

In other words, during the time the employee engaged in the instance, he or she was not doing what they should. The employee was acting under his or her own capacity. The employee was not following the instructions of the employer.

Here is an example of this. A company’s employee causes an accident in a company car. In most cases, this would be the responsibility of the business to cover the losses. But, if the employee used the company car after hours to go to a bar, the incident is not a direct link to the employer.

Court cases can vary here. Having the right general liability insurance can help settle certain legal costs. Many of these claims occur on your property, making them harder to dispute. However, your business insurance agent will help you to do so.

Also Read: Expanding General Liability Insurance with Umbrella Coverage

Posted 11:04 AM

Tags: business insurance, general liability insurance
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