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As you are aware that a claim for Negligent Entrustment arises when one party is held liable for negligently giving someone else a "Dangerous Instrumentality" with which that person causes injury to a third party.

NEGLIGENT ENTRUSTMENT

It generally happens in case of Motor Vehicles, that owner of a vehicle sometime allows to use of his vehicle by some person of his family or friends etc., without knowing the competence of person and skills of driving at public places.

Automobile loss due to negligent entrustment can arise from employees driving company-owned vehicles, their personal vehicles or other vehicles on company business. Employers have a responsibility to know if an employee is too inexperienced or incompetent to drive a vehicle safely. In the employment context, an employer may be found liable if the employee's record of reckless or dangerous conduct was known to the employer or if the employer could have easily discovered this record by conducting a diligent search.

The Concept Of Negligent Entrustment and Dangerous Instrumentality

DANGEROUS INSTRUMENTALITY

A dangerous instrumentality is an item which is either inherently dangerous or poses significant risk of damage if used negligently. At common law, the doctrine of dangerous instrumentality was an offshoot of what is known as vicarious liability. Under vicarious liability, a principal is liable for the actions of his or her agent. In Old England, that was generally an arrangement between master and servant, under which the master entrusted the servant with something that could cause serious bodily injury or damage.

The servant had no money and if the servant negligently used the item, an injured person would find the servant had an empty pocket to compensate for damages.

Assigning responsibility to the master would protect the public and possibly event make the master more careful allowing or directing use of dangerous items.

There are various items such as Motor Vehicles, Gun, Explosives etc. are "Dangerous Instrumentalities"

PLEASE NOTE THAT:

Not every potentially dangerous item qualifies as a dangerous instrumentality for which an owner might be liable.

The Florida Supreme Court in Southern Cotton Oil Co. v. Anderson, 80 Fla. 441, 469 (Fla. 1920), extended the doctrine to motor vehicles, holding that owners may be held accountable for any damages suffered by third parties as the result of the negligent operation of their vehicles, when they are driven by others with their knowledge and consent. This doctrine imposes strict vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another.

 

Therefore, whoever authorizes and permits an instrumentality that is peculiarly dangerous in its operation to be used by an individual on the public highway is liable in damages for injuries to third persons caused by the negligent operation of such instrumentality on the highway by any person so authorized by the owner of the instrumentality.

Above Case Law has extended vicarious liability to the owner of a vehicle acting as a lessor or bailor for the negligent operation of the vehicle by the lessee or bailee. The owner-lessor is vicariously liable in situations where the vehicle is operated by one other than the authorized lessee in violation of the terms of the lease. The owner of a vehicle under long-term lease is liable under the dangerous instrumentality doctrine for the negligence of driver of vehicle. In addition to holding owners vicariously liable, courts also recognize the vicarious liability of lessees and bailees of motor vehicles who authorize other individuals to operate the motor vehicles. However, whether an entity or individual is vicariously responsible as a bailee for the negligent operation of a motor vehicle will depend on the facts.

The "Negligent Entrustment" involves the party allowing someone else to use dangerous instrumentality tough either know or should know that such usage could be dangerous to the third parties. Thus a guardian of a child knowing that child is not trained or has skill to drive the motor vehicle in public and allows child to drive motor vehicle, then he is liable in case of injury or damage to third party due to recklessly driving of child.

THE NEGLIGENT ENTRUSTMENT DEPENDS ON

1. Entrusting inherently dangerous item to a person he/she knew or should have known would be unsafe with it;

2. That the person to whom the item was entrusted was incompetent and unfit to use it;

3. That the defendant has known or should have known that the person entrusted was incompetent,unfit or incapable of safely using it; and

4. That the incompetent user proximately caused injury to the third party through dangerous item.
The Negligent Entrustment is based on "Common Law of Bailment" and based on the assertion that the owner of "Dangerous Instrumentality" knew or should have known that, the borrower , agent or other person handling the instrumentality is not competent.

COMMON LAW OF BAILMENT

INVESTOPEDIA DEFINES

The term bailment refers to a legal relationship between two parties in common law, where assets or property are transferred from a bailor to a bailee. In this relationship, the bailor transfers physical possession of a piece of personal property to the bailee for a certain period of time but retains ownership. There are three different types of bailment, which benefit the bailor, bailee, or both.
Bailments are common in our everyday lives, including in the relationships we have with our banks. Bailments are also common in finance, where the owner of securities transfers them to another party for short selling. Since they are contractual agreements, failure to live up to the terms and conditions of a bailment can lead to legal disputes.

KEY TAKEAWAYS

  • A bailment involves the contractual transfer of assets or property from a bailor, who temporarily relinquishes possession but not ownership, to a bailee.
  • The bailee must intend to and actually physically possess the bailable chattel or asset.
  • There are three types of bailments—those that benefit both parties, those that benefit only the bailor, and those that only benefit the bailee.
  • Although the burden depends on the type of bailment, the bailee must always treat the bailor's property with a reasonable amount of care.
  • Damage or loss to property due to negligence of duty in a bailment can result in legal disputes.

PLEASE NOTE THAT

The Negligent Entrustment differs from Vicarious Liability in that the lessor /owner himself held to be negligent as against the lessor being held liable for the negligent actions of his agent. Claims which cannot be based on vicarious liability can possible be based on negligent entrustment. While courts may hesitate to hold owners and lessor vicariously liable for the accident caused by the operator , they may allow claim for negligent entrustment.

VICARIOUS LIABILITY

The rule of vicarious liability imposes liability on one person for the act done by another person. Normally, a person who has done the wrongful act should alone be made liable for the injurious consequences arising out of it, but the principle of vicarious liability is an exception to it. In order to held a person liable for the act done by another person, it is necessary that there should be a certain kind of relationship between the two persons and the wrongful act done should be, in a certain way, connected with that relationship. The common examples of such relations include principal-agent relationship, master-servant relationship and partners.

 

LET'S CONSIDER THE DIFFERENCE BETWEEN NEGLIGENT ENTRUSTMENT & VICARIOUS LIABILITY

When you loan your car to a bad driver

If you loan your car to someone who you know is an unsafe driver, you may be liable for any accident that person may cause. In many states, both the owner and the driver of a vehicle can be named in a lawsuit under a theory of "vicarious liability." Even in the absence of "owner's liability" statutes, the common law theory of "negligent entrustment" can make you liable for any injuries caused by a bad driver you trusted with your car.
Under the Family Car Doctrine, for example, parents will be held liable for damage caused by a minor driving the vehicle, even if the minor household member isn't listed on the automobile insurance policy. For this reason, parents should be cautious when allowing teens to drive and make sure they are mature enough to handle such a responsibility.

When you hire someone to drive a company vehicle

Likewise, under general negligence theories of vicarious liability and "respondeat superior" ("let the master answer"), employers may be liable, along with their employees, for accidents caused by their employees while operating company vehicles.
This type of vicarious liability is generally limited to automobile accidents that occur during the course of employment, and doesn't apply if the employee was using the vehicle for errands outside of work or for personal reasons.

For example, if an employee gets into an accident while he is driving to a client's office to drop off some paperwork, the employer may be liable since the accident occurred during the scope of employment. In that situation, the employee was using the car for business. However, if the employee instead decides to go on a 2 hour unauthorized trip to the mall and gets into an accident during that time, the employer will likely not be held liable because the employee was using the car for purely personal reasons.

Here, the employee was not acting within the scope of employment.

PLEASE NOTE THAT: In case of " Negligent Entrustment" you are handing over your vehicle even knowing that the person borrowing your car is not competent and do not have skills of driving in public. But in case of Vicarious Liability, the employer or principal knows the skills or competency of his employees or agent and he will not be liable in case his vehicle is used for unauthorized purposes.

To recover loss due to negligent entrustment of a motor vehicle, the injured party must generally prove five elements to establish the company's liability:

1. The company entrusted the vehicle to the driver or the person was driving on behalf of the company.
2. The driver was unlicensed, incompetent, negligent or reckless.
3. The company knew or should have known that the driver was unlicensed, incompetent or reckless (negligent retention).
4. The driver was negligent in the operation of the vehicle.
5. The driver's negligence resulted in property damage or bodily injury.

Drivers may be judged incompetent to operate a motor vehicle for one or more of the following reasons:

1. Not possessing a valid driver's license or driving with a suspended license;
2. Not possessing a commercial driver's license (CDL) when it is required for the type of vehicle being operated;
3. Being deemed unqualified due to lack of experience;
4. Driver is an alcoholic;
5. Driver is not competent according to Motor Vehicle Act, 1988 to drive vehicle;
6. Driver is minor and does not acquire proper training and liacense;
7. A motor vehicle record (MVR) with several at-fault violations such as intoxication, reckless and distracted driving, numerous accidents or moving violations in the previous few years.

CONCLUSION

From above discussion we conclude that in case of Negligent Entrustment an owner/lessor allows using his/it vehicles or other dangerous instrumentalities to another person knowing that the other person is not competent or has skill to use the vehicles in the public. The Negligent Entrustment is governed by "Common Law of Bailment".

DISCLAIMER: The article presented here is only for sharing information with the readers. The views are personal shall not be considered as professional advice. In case of necessity do consult with legal advisors.


 

Published by

FCS Deepak Pratap Singh
(Manager Compliance -SBI General Insurance Co. Ltd.)
Category Corporate Law   Report

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