Legal liability is the state of being responsible for a criminal or civil wrong. It covers many areas of law, including civil, commercial, contract, and tort. Legal liability can result in insurance claims, lawsuits, and a variety of penalties. Some forms of legal liability are covered by statutes of limitations and some are not. A person is liable for the consequences of their actions, whether it be a car accident resulting in injuries or a defective product that causes property damage. The claimant must prove that the alleged conduct is the basis for the legal wrong, and if they are successful they may be awarded compensatory damages.
Torts are the most common form of civil legal liability. They are defined as wrongful acts that cause loss and injury without the perpetrator intending to do so. They include negligence, strict liability, vicarious liability, and breach of the duty of care. Negligence is the most common tort, and it involves a person or company failing to exercise reasonable care in their duties and causing injury as a result.
The claimant must prove all 4 elements of the tort of negligence in order to receive compensation: (1) a defendant had a duty; (2) the defendant breached this duty; (3) the breach directly caused an injury; and (4) that injury resulted in damages. Some torts are not based on negligence, such as intentional or reckless acts. These types of acts are considered crimes, and can carry harsher penalties than negligence.
An employer can also be liable under the doctrine of respondeat superior, which is a general rule that an employer is responsible for the negligent acts of their employees when these actions are done within the scope and course of their employment. The employee must be an actual employee of the company and must have been acting in the course of their employment in order for the company to be found liable under this theory of liability. The employer must have actually hired, trained, supervised, and retained the employee in order for it to be held responsible under this theory of liability.
In addition to the above theories of liability, some claims can be based on statutory or regulatory provisions such as breach of contract and strict liability. Strict liability can be imposed by statute, or it can be established under common law. In cases of strict liability, the claimant must prove that the alleged act was a proximate cause of the injury and must have been caused by the proximate cause.
A common source of legal liability is claims related to forward-looking statements made by management. While these statements are valuable to analysts and investors, plaintiffs’ attorneys have a history of successfully challenging forward-looking statements in court when they fail to pan out. To avoid this, companies should seek advice from a specialist regarding safe harbor disclosures.