What Is Corporate Negligence?
Negligence is a principal of civil tort law where a plaintiff alleges that a defendant breached a duty of care that caused harm. The most common type of negligence cases involves lawsuits against individuals due to motor vehicle accidents or medical malpractice claims. However, corporations may also be held accountable for negligent decisions in a civil lawsuit.
Corporate Neglect
-
In order for a corporation to be found liable for negligence, a plaintiff must demonstrate that the company breached a duty that it owed and that such acts or omissions caused harm. For example, a credit card company that accidentally released confidential financial information of its customers thereby causing risk for identity theft may be found negligent.
Vicarious Liability
-
A parent corporation may found liable for the negligence of its subsidiary companies even if the parent company did not take part in any wrongful acts. This vicarious liability may be established if a plaintiff demonstrates the parent company had an obligation to oversee the actions of its subsidiary, or if the two components worked sufficiently close so as to be deemed one organization.
Shareholder Suits
-
A common scenario where a negligence claim is brought against a corporation is when its own shareholders file suit claiming the company engaged in actions that were deceitful or otherwise harmed the value of the company's stock. In the fallout from the 2008 financial crisis, Bank of America faced a multi-billion dollar lawsuit by its shareholders due to its acquisition of the failed investment company, Merrill Lynch. In that case, shareholders claimed Bank of America failed to disclose all relevant financial information about the acquisition at the time shareholders voted on the business deal and that these actions cost over $15 billion dollars.
References
Resources
Writer Bio
Kevin Owen has been a professional writer since 2005. He served as an editor for the American Bar Association's "Administrative Law Review." Owen is an employment litigator in the Washington D.C. metropolitan area and practices before various state and federal trial and appellate courts. He earned his Juris Doctor from American University.