Supreme Court Victory for Employers

On June 23, 2011, the California Supreme Court overturned a $22.5 million personal injury verdict from Ventura County in a ruling that will affect any California employer that hires drivers.  In Diaz v. Carcamo (200 WL 2473597), the Court limited how people can sue an employer when an employee causes a traffic accident.  The Court ruled that if an employer is willing to take responsibility for its employee’s bad driving, the employer will not also face a claim of negligent hiring of the employee as a driver in the first place.

In general, a person injured by someone driving a car in the course of employment may sue not only the driver but the driver's employer.  Under California tort law principles, the employer can be sued on two different legal theories:  (1) respondeat superior and (2) negligent entrustment.  Respondeat superior is a form of vicarious liability, which makes the employer liable, regardless of fault, for the negligent driving of its employee when in the course and scope of his/her employment.  Negligent entrustment, on the other hand, is a finding of liability against an employer for its own negligence in poorly selecting an employee to drive a vehicle.

In Diaz, Plaintiff Dawn Diaz was driving south on U.S. Highway 101 near Camarillo. Defendant Jose Carcamo, a truck driver for Sugar Transport of the Northwest, LLC, was driving north in the center of three lanes.  Defendant Karen Tagliaferri, driving in the center lane behind Carcamo, moved to the left lane to pass him.  Tagliaferri failed to signal, and when pulling back into the center lane, hit Carcamo's truck, spun, flew over the divider, and hit Diaz’s vehicle.  Diaz sustained severe, permanent injuries.

Diaz sued Tagliaferri, Carcamo, and Sugar Transport.  She alleged Carcamo and Tagliaferri drove negligently, and that Sugar Transport was both vicariously liable for employee Carcamo's negligent driving, and directly liable for its own negligent hiring and retention of him. When answering the complaint, Carcamo and Sugar Transport denied any negligence.

At trial, Tagliaferri conceded she was negligent.  Carcamo and Sugar Transport contended Tagliaferri was solely at fault; however, Sugar Transport offered to admit vicarious liability if its employee Carcamo was found to be negligent. That admission, Sugar Transport argued, barred plaintiff from further pursuing her claims for negligent entrustment, hiring, and retention.  The trial court disagreed.

In support of her negligent hiring claim, the Ventura County trial court admitted evidence offered by plaintiff of Carcamo's driving and employment history.  Carcamo had been involved in two prior accidents, one in which he was at fault and was sued, and the other occurring only sixteen days before Diaz’s accident. Other evidence showed Carcamo was in the United States illegally, that he had used a false Social Security number to obtain employment, that he had been fired from or quit without good reason three of his last four driving jobs, that he had lied in his application to work for Sugar Transport, and that, when Sugar Transport had contacted Carcamo's prior employers for references, the only response was negative.

Before closing arguments, Sugar Transport stipulated with Diaz to vicarious liability for employee-driver Carcamo's negligence, if any were found by the jury.

After deliberation, the jury found Tagliaferri and Carcamo had both driven negligently, and that Sugar Transport was negligent in hiring and retaining Carcamo as a driver.  The jury allocated 45% fault for the accident to Tagliaferri, 35% to Sugar Transport, and 20% to Carcamo.  The jury awarded Diaz over $17.5 million in economic damages, and $5 million in noneconomic damages.

The Court of Appeal affirmed the judgment from the trial court.  The Supreme Court, however, after an extensive analysis of California’s system of allocating liability for tort damages based on comparative fault (a system created by decisions of the Supreme Court in the 1970's and by the California electorate's later adoption of the Fair Responsibility Act of 1986 (Proposition 51)) held that Sugar Transport's offer to admit vicarious liability for any negligence of its employee-driver required the trial court to withhold plaintiff's negligent hiring and retention claims from the jury.  This withholding also then required exclusion of the evidence Diaz offered to support those claims, including Carcamo's poor driving record and employment history, his dishonesty, his status as an illegal alien and resultant use of a false Social Security number to obtain employment.  The Supreme Court remanded the case back to the Ventura County trial court for a new trial consistent with its ruling.

Specifically, the Supreme Court held that:

(1) the employer's concession that it was vicariously liable for its employee’s negligence rendered evidence of the employer’s negligent hiring and retention of the truck driver irrelevant, disapproving an earlier appellate court decision to the contrary;

(2) the employer's failure to admit vicarious liability earlier did not forfeit its right to the exclusion of the evidence; and

(3) the trial court's error in admitting evidence of negligent hiring and retention, and including the employer on the special verdict form was prejudicial to the employer.

This ruling should plainly be chalked up in the win column for businesses and insurance companies.  This decision eliminates the risk of double liability to the employer:  for the vicarious liability for the negligence of its employee, and then the independent liability for hiring or keeping an employee with known problems.