What is a 'Vicarious Liability'

A vicarious liability is a situation in which one party is held partly responsible for the unlawful actions of a third party. The third party also carries his or her own share of the liability. Vicarious liability can arise in situations where one party is supposed to be responsible for (and have control over) a third party, and is negligent in carrying out that responsibility and exercising that control.

BREAKING DOWN 'Vicarious Liability'

For example, an employer can be held liable for the unlawful actions of an employee, such as harassment or discrimination in the workplace. Even though the employer is not the one who committed the unlawful act, the employer is held liable because it is considered responsible for its employees' actions while they are on the job and it is considered to be able to prevent and/or limit any harmful acts performed by its employees. The employer may be able to avoid vicarious liability by exercising reasonable care to prevent the unlawful behavior.





Another common source of vicarious liability occurs when a child behaves negligently. The parent can sometimes be held vicariously liable for the child's actions. One situation where this might occur is if a child injures or kills someone while driving.

RELATED TERMS
  1. Secondary Liability

    A type of legal obligation where one party assumes legal responsibility ...
  2. Joint And Several Liability

    When multiple parties can be held liable for the same event or ...
  3. Cross Liability Coverage

    An endorsement that provides coverage for insurance policies ...
  4. Liability

    Liabilities are defined as a company's legal debts or obligations ...
  5. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
  6. Third-Party Insurance

    An insurance policy purchased for protection against the actions ...
Related Articles
  1. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  2. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
  3. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  4. Small Business

    Master The Art Of Negotiation

    Learn the strategies that will help you to come out on top in any negotiation.
  5. Investing

    Party City Holdings: How It's Fared Since Its 2015 IPO (PRTY)

    Learn about Party City Holding's performance as a public company. Investors would have lost much more than the Russell 2000 Index by investing after the IPO.
  6. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  7. Taxes

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  8. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
  9. Small Business

    What is Unlimited Liability?

    Unlimited liability means that the owners of a business are liable for the entire amount of debt and obligations of that business.
  10. Investing

    Explaining Accrued Liability

    Accrued liability is an accounting term for an expense a business has incurred but has yet to pay.
RELATED FAQS
  1. What is the difference between legal liability and public liability?

    Discover the differences between a general legal liability, a specific public liability and a professional indemnity in the ... Read Answer >>
  2. What are some examples of current liabilities?

    Examine some common examples of current liabilities a company may owe within a year or less in order to accurately assess ... Read Answer >>
  3. How might a company's contingent liabilities affect its share price?

    Discover what contingent liabilities are, and how and to what extent such liabilities may have an impact on a company's share ... Read Answer >>
  4. What types of future events are taking into account for contingent liability?

    Understand the concept of contingent liabilities, and learn about some of the most common types of contingent liabilities ... Read Answer >>
  5. What are the official FASB guidelines regarding contingent liabilities

    Learn how the Financial Accounting Standards Board, or FASB, treats the recognition, estimation and disclosure of contingent ... Read Answer >>
Hot Definitions
  1. Trumponomics

    Trumponomics is a term for the economic policies of President Donald Trump.
  2. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  3. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  4. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  5. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center