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Colorado lawmakers have introduced a bill that proponents say would hold corporations accountable for employee negligence and expose employer wrongdoing,  while defense attorneys warn the bill could increase litigation costs and risks for some companies.

HB21-1188 would allow a plaintiff to bring direct negligence claims against an employer who has already admitted vicarious liability for its employee’s negligence. If passed, the bill would undo the Colorado Supreme Court’s 2017 holding in Ferrer v. Okbamicael, where the court held that an employer’s admission of vicarious liability bars a plaintiff’s direct negligence claims against the employer.

Under the respondeat superior doctrine, an employer can be held vicariously liable for an employee’s negligence as long as the misconduct occurs within the course and scope of the worker’s employment. But the company could also be liable for its own direct negligence, such as negligent supervision, training and hiring or failure to properly maintain a company vehicle.

The Ferrer decision allowed employers to avoid direct negligence claims by admitting vicarious liability. When direct negligence claims are barred, plaintiff’s attorneys can’t take depositions or make other discovery requests regarding the employer’s hiring and training practices, maintenance records or other conduct that might have led to the injury.

“[Ferrer] says once they admit vicarious liability, that’s it. They’re done. You can’t do anything else with the company,” said Michael Nimmo, former president of the Colorado Trial Lawyers Association, which is supporting HB21-1188. “So this bill really is about corporate responsibility.”

“All of this bad conduct that’s out there, potentially, is being hidden from the public, and it’s being hidden from the plaintiff,” said Nimmo, a partner at Denver Trial Lawyers. “We can’t right the wrong from the right people. We can only bring it against the employee and the company for the employee’s conduct rather than the employer’s conduct.”

Defense and employer-side attorneys say the Ferrer ruling has helped to streamline litigation by eliminating the time, costs and complexity associated with discovery.

“…(W)here an employer has conceded it is subject to respondeat superior liability for its employee’s negligence, direct negligence claims against the employer that are nonetheless still tethered to the employee’s negligence become redundant and wasteful,” Justice Monica Márquez wrote in her majority opinion in Ferrer.

“That expansion of discovery puts pressure on the employer to settle the case,” said Evans Fears & Schuttert partner Lee Mickus, who filed an amicus brief in Ferrer on behalf of the Colorado Defense Lawyers Association.

“All that becomes very expensive, and it becomes very disruptive,” he said. “And a lot of small businesses … don’t have the resources to be in a position to manage litigation full time while they’re also trying to run a business full time.”

In addition to increased litigation costs and time, direct negligence claims can also open employers up to reputational risks as potentially embarrassing or damaging information could become public during discovery or trial, said Sterling LeBoeuf, a partner at Davis Graham & Stubbs. “It’s one thing to say this one employee messed up on this one occasion. And it’s another thing to have your whole organization opened up for examination,” he said. LeBoeuf added employers could also be hit with higher insurance premiums over time if they face additional liability claims.

According to the attorneys, respondeat superior issues most often arise in the transportation and trucking industry; the Ferrer case involved a cab company whose driver hit a pedestrian. But other industries could fall within the scope of HB21-1188. “In theory it would apply to any situation involving a corporation where an employee is involved or an agent is involved,” said Nimmo, including the medical industry in malpractice cases or a property management company in a premises liability case.

Mickus said vicarious liability can apply in “just about any [industry] with exposure to the road,” which includes restaurants, manufacturing, retail and wholesale businesses that have delivery drivers or move their product. But it can also arise in other situations where an employee is interacting with the public, the attorneys said, such as in the retail and hospitality industries.

HB21-1188 was introduced March 4 and has been assigned to the House Judiciary Committee. It has not yet been scheduled for a hearing. The bill’s prime sponsors are Rep. Chris Kennedy (D-Jefferson County) and Sen. Julie Gonzales (D-Denver).

A similar bill was introduced last year but was put on the back burner due to the pandemic. Nimmo said he and other proponents have been working on the bill “for quite some time” to “make it as palatable as possible,” and they have been listening to objections and concerns in order to craft a bill that will get bipartisan support.

According to Nimmo, the bill won’t change the amount a plaintiff is awarded, but it will demand more accountability and transparency from employers. “It doesn’t change the damages,” he said.

“It’s just about holding corporations liable for their own negligent conduct. And if you don’t do that, then what incentive do they have to not be negligent?” Nimmo said. “Because they never have to pay for it. They never have to stand trial for it. It’s never discovered. It’s just in the background, always going on, and nobody knows about it.”

The bill doesn’t allow plaintiffs to recover compensatory or punitive damages more than once for the same injury. But LeBoeuf said direct negligence claims could allow a plaintiff to discover and present evidence of systemic problems in hiring, training or supervising, giving the plaintiff leverage for a bigger settlement or more ammunition if the case proceeds to trial.

“These are the types of arguments that really inflame juries, when they hear about a systemic issue at an employer or at a company,” he said. “And they’re the kinds of arguments and evidence that tend to make juries want to award punitive damages.”

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