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Can employers face both direct and vicarious liability?

On Behalf of | Sep 1, 2022 | Business Litigation

The Illinois Supreme Court recently rejected the McHaffie rule. This rule prevented plaintiffs from raising claims of direct liability against businesses that had already admitted vicarious liability for their employees’ actions.

The rule originated in 1995 with the Missouri Supreme Court’s ruling on McHaffie v. Bunch. Since then, the rule has limited redundant claims, evidence and litigation. It says, in short, that “once an employer has admitted respondeat superior liability for a driver’s negligence,” other theories that could establish the employer’s liability will serve “no real purpose.”

In Illinois, McQueen spells the end of McHaffie

At the heart of the Supreme Court’s ruling on McQueen v. Green was the question of “whether an employer’s admission of vicarious liability for its employee’s misconduct” blocked plaintiffs from claiming that the employer was directly liable.

In this case, Green had worked as an employee of Pan-Oceanic Engineering Company, Inc. He had been scheduled to transport a piece of equipment known as a skid steer. This skid steer weighed several thousand pounds, and Green’s employer had asked him to haul it from Patten Industries. However, when Green noted that Patten had loaded the skid steer “crooked” on his truck’s trailer, Patten refused to reload it. Green had called his supervisor to inform him that the skid steer looked like it had been loaded incorrectly.

Green’s supervisor spoke with a representative from Patten. Then he told Green to drive without reloading the equipment. As he drove back on the expressway, Green saw that the skid steer and trailer were bouncing. When he stepped on his brakes, the trailer swung into a nearby car, injuring McQueen.

The Supreme Court noted that McQueen’s complaint included three counts:

  • That Green had been negligent to drive with an improperly situated skid steer
  • That Pan-Oceanic had been negligent for failing to train Green how to respond to an unsafe load, for telling Green to drive with the unsafe load and for accepting the unsafe load from Patten
  • That, when it sent Green onto the highway with an unsafe load, the company had acted recklessly enough to merit punitive damages

During the trial, the parties agreed to use a set of jury instructions that clarified:

  • First, that the plaintiff was suing Pan-Oceanic and Green as “principal and agent,” respectively
  • Second, that if the jury found Green liable, they must find Pan-Oceanic liable
  • Third, that if the jury found that Green was not liable, then they “must find” that Pan-Oceanic was not liable
  • Fourth, the third point “should be modified or stricken” if the evidence established liability for Pan-Oceanic independent of Green’s actions

Notably, the lawyers for Pan-Oceanic didn’t object when the court omitted the third point after both parties gave their closing arguments.

The jury eventually found that Green was not liable, but Pan-Oceanic was. The jury then went on to award punitive damages of $1 million.

Pan-Oceanic appealed, and the appellate court ruled in its favor. It followed the logic from McHaffie, arguing that, like other jurisdictions, Illinois disallowed direct claims against employers that admitted vicarious liability. It also said the trial court’s ruling was legally inconsistent. The jury should not have been able to find Green free of liability and then award punitive damages against Pan-Oceanic. Accordingly, the appellate court awarded Pan-Oceanic a new trial.

Why vicarious liability does not block claims of direct liability

When it received the case, the Supreme Court’s main concerns were:

  • Whether, per McHaffie, employers that admitted vicarious liability should be free from claims of direct liability
  • Whether the trial court’s decision had been legally inconsistent
  • Whether Pan-Oceanic deserved a new trial because the jury did not receive sufficient instruction

The Supreme Court rejected the McHaffie rule. Instead, it clarified that plaintiffs could pursue any and all claims for which there are “good-faith factual basis.” This includes claims of direct negligence against an employer, even if that employer is also liable for its employee’s negligence.

Furthermore, the opinion noted that McHaffie was based on “policy” and that it was “not well founded.” McHaffie served to reduce problems that the court could, itself, eliminate. McHaffie was supposed to guard against prejudicial evidence, but the courts can also root out prejudicial evidence. Similarly, McHaffie aimed to prevent “double recovery,” but the Supreme Court noted that it was a “blunt instrument” for that task. The court could also pursue different methods to prevent double recovery.

At the same time, the Supreme Court clarified the occasions when a plaintiff might claim direct negligence on the part of an employer:

  • Whenever the employer’s direct actions were a proximate cause to the plaintiff’s injury
  • Some possible causes include negligent hiring, negligent supervision and disciplinary failures

The Supreme Court also quickly dismissed the idea that the trial court’s verdict had been legally inconsistent. The fact that Green and Pan-Oceanic faced separate liability meant they faced separate fates. Likewise, the Court dismissed Pan-Oceanic’s concerns about the jury instructions. When Pan-Oceanic had failed to address the jury instructions at the proper time, it had forfeited the matter.

Potentially far-reaching consequences

Others have already noted that this decision could have far-reaching ramifications, even outside the transportation industry. In fact, the Illinois Trial Lawyers Association and the Illinois Defense Counsel already expressed their concerns about these potential consequences. They both submitted amicus curiae briefs to the Supreme Court.

Businesses need to be mindful of these potential consequences. By rejecting McHaffie, the Supreme Court has made it easier for plaintiffs to raise claims against them, and their attorneys will not be able to wield vicarious liability as a shield against claims of direct negligence.