Employer's Vicarious Liability (Geschäftsherrenhaftung)

Concept

Under Section 831 BGB, employer’s vicarious liability is a principal’s tortious liability for damage that an auxiliary person appointed by it to carry out a task (such as an employee) unlawfully causes to a third party while carrying out that task.

The Principal’s Ability to Be Discharged from Liability

Unlike contractual liability for vicarious agents under Section 278 BGB, where the debtor is unconditionally liable for the fault of its assistant, a principal under tortious employer’s vicarious liability can be discharged from liability by proving that it carefully selected and instructed the auxiliary person and adequately supervised its activity; if this proof of due care succeeds, the principal’s liability is excluded.

Relevance for General Liability Insurance

Employer’s vicarious liability is a central liability risk covered by a company’s general liability insurance, since companies are regularly liable to third parties, alongside the employee directly responsible, for tortious harm caused by their employees; the possibility of discharge under Section 831 BGB does not change the practical necessity of corresponding insurance coverage, since proving due care can be difficult in individual cases.