Tort Liability in the Agency Relationship: Know When You’re At Fault

One of the many tools a company can use is hiring agents to act on its behalf.  Because agents have a certain level of expertise, they may be able to carry out certain tasks more efficiently and with higher quality.  It allows companies to be run more smoothly, and allows a company to concentrate its resources on tasks that are within the company’s purview.  However, there are some drawbacks to hiring agents.  Chief among them is the liability of a principal to third parties. Therefore, when hiring agents, it is important to understand when you could still be on the hook for your agent’s actions.

Traditionally, a principal is liable for his agent’s actions.  A principal who hires an agent to perform services in his or her affairs and who controls or who has the right to control the physical conduct of the other in performance of the service will be liable for the agent’s actions. Often times, if there is insufficient physical control, the agent may be deemed to be an independent contractor, and therefore the principal will not be liable.   Further, the agent’s actions must be within the reasonable scope of his or her duties.  They must fall within his or her actual or apparent authority.  Therefore, in most instances, a principal is liable for the agent’s actions.  However, that is not always the case.

An agent may be solely liable to a third party for tortious conduct in certain circumstances.  The main such example is when the agent violates the authority given to him or her.  If the principal has given the agent certain instructions as to what he or she may do, and the agent violates these instructions, the principal may be off the hook for the agent’s liability.  This is especially true if the third party is made aware of the agent’s authority limitations.  In this situation, the third party may still attempt to sue the principal for any damages caused.  However, the principal can then turn around and sue the agent to recover any damages caused.  In such a scenario, the principal will only be able to recover for the damages caused outside the scope of authority.

There are many benefits to hiring agents to carry out functions for your business.  However, these companies are still exposed to liability for the agent’s conduct as if it were the company itself acting in such a way.  Although most of the time the principal is solely liable to a third party for tortious conduct by the agent, a principal can recover from the agent damages it has suffered if the agent acted outside of his scope.  Therefore, there is recourse that a principal may have against an agent, and consulting with the right legal team is the first step to recovering what rightfully belongs to the principal. Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.