Tort liability

What is tort liability?

Tort liability is a business’s legal obligation to compensate individuals who have been harmed or lost something because of their actions or negligence. The term “tort” itself refers to a wrongful act that leads to harm to another person.

For example, if a customer becomes seriously ill due to improperly prepared food, the restaurant could be held legally responsible for their medical expenses, pain and suffering.

Types of tort liability

Understanding different types of tort liability is crucial for small business owners to reduce risks and manage potential legal and financial consequences. There are several types of torts, including:

• Negligence: Involves careless behavior or inaction.
• Intentional torts: Involves causing damages through deliberate harm.
• Strict liability: Responsibility is imposed without the need to prove negligence or intentional harm.

For example, a negligence tort might involve an accountant making a mistake in their client’s paperwork, leading them to lose out on significant tax advantages and paying more. While the error was unintentional, the accountant could be found liable and have to compensate for the client’s loss.

Intentional torts happen when someone makes a purposeful action that causes harm. Say you lose your temper, threaten to punch a customer and shove them from your store. These actions could give rise to a civil lawsuit if the customer decides to take you to court.

With strict liability, a business owner could be held liable regardless of intent. Product liability is a strict liability offense, meaning you — a manufacturer or supplier — could be liable if a product is defective, even if you created or sold the product with the best intentions.

4 elements needed to prove tort liability

To establish tort liability, specific elements must be proven, such as:

• Duty of care: The business was obligated to ensure the victim’s safety or well-being.
• Breach of duty: The business did not uphold this obligation and failed to act with due care.
• Direct causation: The victim’s injuries directly resulted from this breach.
• Actual harm: The victim suffered measurable damages, such as medical costs or loss of income.

If these elements are confirmed, the business is typically required to compensate the victim for medical expenses, lost income, pain and suffering and other damages.

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