The Difference Between Jointly Liable & Joint & Several Liability

No matter what type of business you operate, liability is always going to be a concern. This is especially true if you own a company such as a go-kart business in which physical injury is a clear and present danger. Liability is the primary reason that businesses must be properly insured because a liability claim or lawsuit can seek much more than the entire total assets of the company. Understand the risk by understanding the different ways in which you are liable, namely joint liability and joint and several liability.

Joint Liability Elements

The term “joint liability” refers to the amount of liability assigned to two or more people involved in a business or enterprise. In this case, any partnership of two or more people would be equally liable for all debts and potential legal action related to a business. This means that all parties involved share an equal risk in terms of handling debt and in terms of their responsibility in the event of a lawsuit.

It’s important to remember that if you form a partnership, you can still be held jointly liable even if your partner agreed to a contract without your knowledge or approval. That’s because a partnership assumes that all parties are responsible for the actions of each individual member whether or not each person agreed to a contract. As a result, if your company was sued due to the actions of one of your partners, you would all be held responsible for any monetary damages a court or a jury awards against your business.

Joint & Several Liability Elements

Some states have adopted a rule known as “joint and several liability,” which is used when two or more parties are held liable for an event, incident or contract breach. Under this rule, any member of a partnership can be held liable for the total damages arising from a lawsuit regardless of that person’s individual responsibility for whatever went wrong.

For example, let’s say you owned a private security business with four other partners and one of your partners was negligent, causing injury to a client. If that client sued your company, and you were more financially able to pay than your partners, you would be held 100 percent responsible for paying the damages, regardless of the fact that you weren’t negligent. In theory, however, you could sue your own partners and force them to contribute to that payment, but in the eyes of the law, since you are most able to pay the damages arising from a lawsuit, a plaintiff could collect the entire sum from you alone.

Joint Liability and Joint & Several Liability Differences

The primary difference between these two rules is that with joint liability, the responsibility for an event or incident that goes wrong is spread equally among the members of a partnership. In contrast, joint and several liability can shift among partners depending on ability to pay or on whom a jury or judge finds to be most responsible for the loss or damages that occurred.

Another difference is that with joint liability, each partner knows ahead of time what he or she will be responsible for if an outside party takes legal action and wins a monetary award. With joint and several liability, each partner has no way of knowing if he or she will be held solely responsible for paying off a monetary award. The reason that some states have adopted the joint and several liability rule is to better protect plaintiffs against defendants in a partnership who lack assets to pay off a jury award for monetary damages.