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A Shift in Vicarious Liability (Armes v Nottinghamshire County Council)

01 November 2017. Published by Kristiana Reynolds, Associate

A further extension of Vicarious Liability creates uncertainty as to how the Court may apply this principle in the future to other sectors and working relationships.

The Supreme Court has ruled that a Local Authority was liable for child abuse committed by foster parents, following a series of recent extensions to the principle of vicarious liability (the judgment can be found here).

In summary, the appellant (Armes) was in the care of the respondent (Nottinghamshire County Council), who placed her into the care of foster parents on two separate occasions. During her first placement the appellant was physically and emotionally abused, and during her second placement she was sexually abused. For the purpose of this appeal, the Local Authority were not alleged to have been negligent in selecting and supervising the foster parents, however the appellant alleged vicarious liability for the abuse committed (which the High Court and Court of Appeal had previously dismissed).  

In its findings, the Supreme Court considered the inability of foster parents to compensate the children appropriately for the abuse committed, and commented that exposing local authorities to this risk of liability may improve supervision and vetting of foster parents. Some commentary has criticised the judgment for its potential to discourage Local Authorities from placing children in foster care.  

The wider concern is that this is a significant move away from the typical employer/employee relationship, which historically has been an essential component for a finding of vicarious liability. In recent years the courts have extended the scope of the principle to relationships said to be "akin" to employment, but this is a step further. Notably, this case (and previous cases extending vicarious liability) has arisen in circumstances where the perpetrator of the wrong, and therefore the appropriate defendant, would not have sufficient funds to compensate the injured party.  

A Supreme Court judgment will be difficult to dislodge in future "test" cases, and it remains to be seen whether vicarious liability will be extended to other sectors/relationships. In the meantime, organisations should consider the extent of their insurance and whether it covers the risk of being held vicariously liable for non-employees' actions. Insurers should also take account of this developing risk when considering the requirements of their insureds, and in the policy terms that they offer.  

For practical next steps, some organisations have already moved to a structure whereby former non-employees are employed, with cross indemnity provisions in their employment contracts, which can provide some level of protection and certainty.