When you’re on the job, your work doesn’t always exist in a vacuum—sometimes, there are other contractors and businesses on the same project as you. As a plumber installing pipes in a brand-new home, you might run into the general contractor, the electrician, or the HVAC installation team—sometimes literally.

When there are multiple parties working together, there may be multiple defendants if someone is injured on the construction site. The economic damages can be astronomical, and the judgement may be made on a joint and several liability basis. What does this mean?

Should something go wrong, there are several different parties to point the finger at. Under joint and several liability laws, you could be held financially responsible for more than your share of the accident. But what is joint and several liability, and how does it apply to you?

It doesn’t have anything to do with your literal joints, but hopefully, we can still take the aches and pains out of understanding liability on the job.

What is joint and several liability?

Joint and several liability laws are used when multiple parties are—or might be—responsible for a specific occurence, accident, or injury.

When all parties are held jointly and severally liable, they are each individually responsible for the full extent of the financial damages. The plaintiff can decide to request the total amount from any individual defendant, but the other parties will have to pay if their co-defendant can’t. This means that someone will cover the costs—the law isn’t overly concerned with who it is.

Imagine the client of your home construction project comes to visit and trips on the electrician’s toolbox left open in the foyer. Trying to catch her balance, she bumps her head into an exposed pipe you’ve just installed. Stunned from the impact, she stumbles through an opening on the ground floor that the contractor neglected to cover up before leaving on lunch break. Now the injured party can claim negligence that involves all three contractors as joint defendants.

The plaintiff may choose to sue all three parties for the collective damage endured.

Hypothetically, these three parties did not play equal parts in the woman’s injuries. The plumber hardly did anything wrong, while the electrician played a small part, and the contractor made a much more costly mistake (though, as always, this would have to be decided in court).

When all parties are held jointly and severally liable, they are each individually responsible for the full extent of the financial damages. The plaintiff can decide to request the total amount from any individual defendant, but the other parties will have to pay if their co-defendant can’t. This means that someone will cover the costs—the law isn’t overly concerned with who it is.

But these laws aren’t applicable in every state or situation. Many states utilize a limited or hybrid version of joint and several liability. What could this look like?

  • It may only apply to parties who are deemed to be responsible for at least half of the damage accrued.1
  • It might only apply to up to 50% of the total awarded damages..
  • It could apply strictly to economic, not punitive, damages.2

When joint and several liability does apply fully, it can feel a bit like entering a pact you didn’t necessarily want to be a part of. If you’re working on a project with other entities and named in a suit, you’re in it together, for better or worse.

How does this differ from several liability?

They may sound similar, but the joint part makes a big difference.

Several liability also comes into play when there are multiple potentially liable parties, but the difference is that each party is held accountable only for their share of the damages.3 Joint liability, as the name suggests, joins the parties held liable together financially.

So, in a case of several liability, if one person couldn’t fulfill their end of the bargain, nothing would change for the other parties. Even though they are held liable as a whole, they are not responsible for the full repayment of damages as a group, but rather as individuals.

This could mean that the plaintiff does not receive the full amount the court awarded to them, because one or more parties couldn’t fulfill their portion of the payment. With joint and several liability, the court-ordered award is guaranteed.

Joint and several liability in action

Let’s refer back to our plumber-contractor-electrician situation. We’ll say that the judge assessed damages at $100,000. Here’s what might happen if all three parties were found liable:

The plaintiff demands that the contractor (who she feels was most at fault) pay the entire $100,000 she’s owed. The contractor could:

  • Pay the amount in full on their own,
  • Declare bankruptcy, shifting the financial burden onto the plumber and electrician, or
  • Request financial assistance from the plumber and electrician, who may or may not agree to contribute.

If the other two parties refuse to pay towards the awarded damages, the contractor may be able to sue them in a separate proceeding for the part they played in the accident.

As the plumber in this scenario, you might only be 10% responsible but wind up paying 50% or even 100% of the damages. The financial burden sometimes falls on whomever has the most money in the bank, not whomever had the most to do with the accident.4

These laws can create inequity between co-defendants but equity for the injured or wronged party. If certain liable parties declare bankruptcy or are otherwise unable to pay, these laws are intended to protect the interests of the plaintiff.

But they don’t necessarily protect you.

What would protect you?

Hopefully it never comes to this, but these joint and several liability laws could affect you and your small business. Recovering from an economic loss after an unfavorable judgment can be difficult for small businesses. For that reason and so many more, you should choose insurance that protects your business from the unforeseen costs arising from liability.

There are two types of insurance that every business owner should have:

  • General liability insurance – This multipurpose coverage can provide investigation, defense, and settlement for claims made by clients and third parties regarding property damage, bodily injury, and personal or advertising injury—whether liability is determined on a joint and several liability basis or not.
  • Professional liability insurance – This form of coverage is also called errors and omissions (E&O) insurance, because that’s exactly what it’s for. Professional liability insurance can save you from paying for damages due to wrongful acts from actual or alleged negligence that happen on the job.

Having the right coverage can make all the difference, especially in joint and several liability situations where you may be on the line for financial damages beyond what you necessarily deserve to be paying.

Join together with Thimble to protect yourself

The goal of this article is never to scare you, but rather to prepare you. Joint and several liability laws could become an unfortunate reality affecting you and your small business, especially when you’re working alongside other people.

With joint and several liability laws, you could be held financially responsible for accidents you didn’t directly cause or were hardly involved in, because the financial burden falls jointly on all liable parties. If the other parties can’t pay and you can, the weight could fall solely on your shoulders.

But you can protect yourself with the right coverage.

Whether you’re looking for coverage that is monthly, day-to-day, or even by the hour, you can find the right insurance without breaking the bank. That’s Thimble.

Covering your bases doesn’t have to be as complicated as resetting a broken bone or acing your anatomy midterm. For insurance that works when you do, Thimble has you covered.

You can get the coverage you need in 60 seconds or less by clicking “Get A Quote” or downloading the mobile app. From there, you’ll breeze through a few quick questions, enter your desired coverage term, and we’ll generate an instant quote. With one last click, you can purchase your policy and receive your policy and Certificates of Insurance (COI) immediately.

Sources:

  1. Investopedia. Joint and Several Liability.
  2. Law Offices of Stimmel, Stimmel & Roeser. Joint And Several Liability – The Basics.
  3. Thomson Reuters Practical Law. Glossary: Several liability.
  4. The Balance. “What Is Joint and Several Liability?

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.