What makes the tourism industry vulnerable to damages claims?
Published 01 November 2019
In current times that favour lean business models and effective delegation, many tourism operators rely on external help to perform various functions, from agents to drivers, guides, cleaners, wait staff and activities organisers, to name a but a few. But what happens if one of these people fails to do their job properly or commits a wrongful or unlawful act?
Vicarious liability is the legal term that refers to one party being held responsible for the actions of another engaged to perform a function on their behalf, according to the Net Lawman website. This applies even if the person engaged has acted against instructions or company policy.
The legal situation
Two legal conditions come into play
it is liability for the negligence (or wrong) of another
it is liability without proof of fault – which means an employer can be liable for the negligence of another, no matter how careful the employer was in all relevant matters, such as recruitment and supervision
To further complicate the legal situation legislation is variable across different Australian jurisdictions under certain conditions. In some cases the person who engaged another may be held solely responsible and in some cases they may not have recourse to claim financial reimbursement from the person they engaged. The law is also unclear in relation to independent contractors who are not directly instructed on how to perform tasks that their role involves.
What constitutes an offence?
Offences can range from negligence or lack of care to failure by the person engaged to perform the function they have been employed to fulfill, through to unacceptable behaviour such as sexual harassment. Vicarious liability claims can be brought by customers or by other staff affected by these actions.
The injury suffered as a result of negligence can be physical, financial or psychological. The types of claims awarded damages by courts can include pain and suffering, medical expenses and future loss of income and enjoyment of life.
How can tourism industry operators protect themselves?
Vicarious liability insurance cover should be considered for businesses that employ others, such as agents, contractors, hosts and consultants, to deliver services for their operation. Professional indemnity alone won’t adequately cover operators for the actions of their contracted employees.
Things to consider
Confirm if any external providers engaged have their own liability and/or professional indemnity policies
Be certain to disclose to your insurer all the services and activities provided by your company and by external providers on your behalf
Be aware that many policies do not automatically include third parties and that definitions of who is insured can vary from insurer to insurer
Employers should carefully check any policy purporting to provide vicarious liability cover for endorsements or exclusions that could leave their business exposed to risk through the actions of or negligence by contractors/sub-contractors
Get professional advice
Vicarious liability is a complex area and one that particularly affects tourism operators who often rely on external help in providing customer services. Gallagher’s tourism industry insurance specialists can help to identify and protect your contractor risk exposures. We’re keen to help.
To the extent that any material in this document may be considered advice, it does not take into account your objectives, needs or financial situation. You should consider whether the advice is appropriate for you and review any relevant Product Disclosure Statement and policy wording before taking out an insurance policy.