Employers could be liable for the negligence of the employees of other firms after a landmark ruling in the Court of Appeal last week.

The decision, which overturns two centuries of English legal tradition, means that for the first time more than one employer can be found liable for the negligent act of an employee.

In the case of Viasystems vs Thermal Transfer, two Court of Appeal judges ruled that subcontractor S&P Darwell and labour-only subcontractor CAT Metal Services were jointly liable for “extensive and expensive” flood damage to a factory by CAT’s employee.

Until now the concept of “vicarious liability” has meant the courts assumed only one employer could have control over the acts of an individual and therefore only one party could be held liable for any negligence.

Peter Rees, a senior partner at law firm Norton Rose, said the ruling meant that the number of companies that can be found liable for negligence had in effect doubled. He said that contracts, especially for labour-only services, could become more complicated as a result.

He said: “Contractors will want to make sure that if a worker is negligent the subcontractor will indemnify it for any liability it may have.” But he said that on small projects contractors do not generally enter into such detailed negotiations and may find they are exposed to claims and cannot be reimbursed by the subcontractor.

Arguably this should lead to a more reasonable approach

John Bradley, Construction Confederation

Mark Taylor, vice president in construction at insurance broker Marsh, said that contractors and subcontractors would need to check that third-party insurance policies would pick up the risk. He said the court decision “strengthens the argument for the project owner to take out

all-embracing cover. This means it doesn’t have to rely on the subcontractors having the appropriate cover.”

John Bradley, legal director at the Construction Confederation, said the decision was unlikely to lead to third-party insurance premiums becoming more expensive. He said: “The only real difference is that the courts will now be able to more easily find more than one defendant responsible. Arguably this should lead to a more reasonable approach to be taken by any parties facing claims and could lower costs.”