Corporate & Transactional
Facing Tort Actions: What You Need to Know
Tort law is one of the main legal avenues that individuals and businesses have when they experience a breach of their civil rights. For business owners, tort law can be both an ally and a roadblock. Companies can take tort actions against other companies for wrongful acts that impact their business, but they can also receive tort lawsuits from fellow businesses, clients, employees, business partners, and other individuals.
Ultimately, tort law holds individuals and businesses accountable for harmful or negligent behavior. By responding appropriately to tort actions against their companies, business owners can ensure that they’re upholding their obligations and carrying out ethical business practices.
Although facing any type of legal action can be daunting, research and preparation can help business owners address the situation and find a favorable outcome. Understanding the basics of tort law can help business owners avoid potential lawsuits and find the best way to proceed when facing a tort action.
What Is Tort Law?
A tort refers to any act — or lack of action — that causes enough harm to result in a civil violation. Tort law exists to address situations where one party causes harm or damages to another, often providing the wronged party with some form of compensation.
While criminal law involves punishing perpetrators of a crime, tort law focuses on giving restitution to victims. Because tort law typically focuses on damages done to a victim instead of the intent of a perpetrator, businesses can be liable for injuries without actively meaning to cause harm (e.g., slip-and-fall accidents).
Tort law is a type of civil law, but it can also address civil violations related to criminal acts. For example, an individual may undergo criminal proceedings for committing assault and then also be sued by the victim under tort law for emotional distress or legal fees. Tort law can also include economic torts, which occur when one party maliciously or negligently harms a business.
What Are the Grounds for a Tort Action?
When faced with a tort action, it’s important for businesses to understand the scope of their liability. Torts don’t just occur when one party directly harms another; if a business violated its duty of care to a client, employee, or business partner, the company may be liable for any damages they experienced. Here are the four key criteria a situation has to meet to qualify as a tort:
- A duty of care exists between the plaintiff and the defendant.
- The defendant violated their duty of care.
- The plaintiff experienced an injury that resulted in financial or non-financial damages.
- The defendant’s behavior or negligence caused the injury to the plaintiff.
It’s important to note that businesses may be considered liable for torts committed by employees while they’re on the job. Because of the doctrine of respondeat superior, employers often assume liability for their employees’ actions, even if company leaders didn’t act maliciously or negligently.
Duty of Care In Business
Businesses are often involved in several situations where they have a duty of care to uphold. For example, they’re obligated to provide a safe work environment for employees and avoid exposing them to potential risks. If an employer fails to address hazards in the workplace and an employee gets injured, they may be vulnerable to a tort action.
They may also have a duty of care to their customers. Businesses can potentially be liable for injuries caused by using their products, especially if those products were defective. This obligation can also extend to injuries that occur on business property, as companies with a public storefront are obligated to take reasonable measures to keep any visitors safe.
For example, there are countless situations where companies had to pay out large sums to customers who were injured on their property, such as a 2021 case where a woman who slipped at an Aldi received a $1.4 million payout.
However, businesses aren’t automatically liable for customer injuries. In 2017, a slip-and-fall lawsuit against Sears ended in their favor due to a lack of evidence of hazardous conditions in the store.
Businesses can help protect themselves against these types of tort actions by upholding their duty of care and providing safe products, services, and spaces.
Potential Compensation for Torts
Businesses found liable for a tort action are typically responsible for paying monetary damages to the plaintiff. Compensation for torts focuses on making the victim whole, or offsetting the loss they experienced due to the tort. Damages may include:
- Property damage or theft – If a business was responsible for the damage or loss of a client’s property, they may pay the total value of the loss in restitution.
- Pain and suffering – If a plaintiff experienced extreme distress or a decrease in their quality of life due to a business’s actions, they may be eligible for additional compensation.
- Punitive damages – In rare cases, the court may order a defendant to pay an additional sum to the plaintiff, exclusively with the intent to penalize them for their actions.
- Lost wages – If the plaintiff had to miss work or experienced an injury that decreased their earning capacity, the defendant may be responsible for covering their lost wages.
Although most successful tort actions result in monetary compensation for losses, non-monetary remedies do occur in some cases. For example, an employee may seek an injunction to stop their employer from promoting hazardous work practices. Businesses should be prepared to provide both financial and non-financial remedies to potential tort lawsuits.
Tips for Mitigating Tort Claims
Because torts don’t require businesses to have an intent to cause harm, it can be challenging to eliminate the chance of tort lawsuits completely. However, there are a few best practices companies can uphold to ensure they’re meeting their duty of care and avoiding situations that could cause harm:
- Understanding industry standards – Duty of care and standards of care can vary widely depending on the industry. Each business should have an in-depth understanding of standards in its field.
- Purchasing business insurance – Business liability insurance can offer financial support to businesses in the event of an unexpected tort lawsuit.
- Using waivers and contracts – Having official documentation in place can help businesses prove that they informed business partners or customers of potential risks, therefore demonstrating a reasonable effort to keep them safe.
Handling Tort Actions as a Business
As with any lawsuit, facing a tort action can be challenging and time-consuming for a business. Because tort law encompasses so many potential actions and lack thereof, it’s critical for businesses to work with an experienced law firm that can help them understand their options. This could include settling out of court to provide restitution to the plaintiffs or gathering evidence to refute their liability for an injury.
Regardless of their specific situations, business owners should collaborate with legal counsel to prepare for all potential outcomes and take steps to avoid future situations where torts could occur.