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California's Latest Word on Negligent Entrustment—Good News for the Defense

Posted on: 9/7/2011
David L. Strong, Branson Brinkop Griffith
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California's Latest Word on Negligent Entrustment—Good News for the Defense

Trucking companies frequently find themselves fighting a dual-theory attack by plaintiffs who allege theories of both negligent entrustment and vicarious liability for a driver's negligence. In a unanimous decision, the California Supreme Court rendered a decision favorable to employers with which all defense counsel handling negligent entrustment claims should become familiar.   

On June 23, 2011, the court decided Diaz v. Carcamo [2011 Cal. LEXIS 6172], holding that (1) if a plaintiff sues for injuries caused by an employee during the course and scope of his employment, under theories of both respondeat superior and negligent entrustment, and (2) the employer admits vicarious liability, plaintiff cannot pursue a negligent entrustment claim, and any evidence proffered solely to support that claim is barred.  

A person injured by someone driving a vehicle in the course of employment may sue not only the driver but that driver's employer. The employer can be sued on two legal theories based on tort principles: respondeat superior and negligent entrustment. Respondeat superior, a form of vicarious liability, makes an employer liable, irrespective of fault, for negligent driving by its employee in the scope of employment. The theory of negligent entrustment makes an employer liable for its own negligence in choosing an employee to drive a vehicle.  

If a plaintiff asserts both theories, and the employer admits vicarious liability for any negligent driving by its employee, the plaintiff cannot pursue the negligent entrustment claim. The court upheld its decision in Armenta v. Churchill (1954) 42 Cal.2d 448 [267 P.2d 303] even though that case was decided prior to the adoption of pure comparative negligence in California, (see Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226] and prior to the California voter's adoption of the Fair Responsibility Act of 1986 (Proposition 51) regarding allocation of damages.  

Background  

Plaintiff Diaz was driving south on a freeway in southern California. Defendant Carcamo, a truck driver for defendant Sugar Transport of the Northwest, LLC, was driving north in the center of three lanes. Defendant Tagliaferri, driving in the center lane behind Carcamo, moved to the left lane to pass him. As Tagliaferri, without signaling, pulled back into the center lane, her vehicle hit Carcamo's truck, spun, flew over the divider, and hit plaintiff's SUV. Plaintiff sustained severe, permanent injuries.  

Plaintiff sued Tagliaferri, Carcamo, and Sugar Transport. She alleged that Carcamo and Tagliaferri had driven negligently and that Sugar Transport was both vicariously liable for employee Carcamo's negligent driving and directly liable for its own negligence in hiring and retaining him. In their answer, Carcamo and Sugar Transport denied any negligence.  

At trial, plaintiff's expert witness testified that Carcamo should have been in the right lane, should have monitored his mirrors better, and should have averted a collision by slowing or steering away as Tagliaferri entered his lane. Plaintiff's counsel argued that Carcamo sped up to keep Tagliaferri from passing, noting Sugar Transport's failure to produce the chart from the truck's tachograph, which would have recorded Carcamo's speed, acceleration, and braking. But another driver, who was the only nonparty witness to the collision between Carcamo and Tagliaferri, testified that Carcamo had not accelerated. With respect to defendant Tagliaferri, her counsel conceded that she was partly at fault; defendants Sugar Transport and Carcamo contended that she alone was at fault.  

Defendant-employer Sugar Transport offered to admit vicarious liability if its employee Carcamo was found negligent. That admission, Sugar Transport argued, would bar plaintiff from further pursuing her claims for negligent entrustment, hiring, and retention. In support, Sugar Transport cited Jeld-Wen, Inc. v. Superior Court (2005) 131 Cal.App.4th 853 [32 Cal. Rptr. 3d 351], in which a Court of Appeal, applying the Supreme Court's holding in Armenta, supra, 42 Cal.2d 448, directed a trial court to dismiss a negligent entrustment claim after the defendant employer's admission of vicarious liability for its employee's driving.  

Over defendant-employer's objection, the trial court admitted evidence of Carcamo's driving and employment history, as offered by plaintiff in support of her negligent hiring claim. The evidence showed two prior accidents involving Carcamo: one in which he was at fault and was sued, the other occurring only 16 days before the accident here. Other evidence showed that Carcamo was in this country illegally and had used a "phony" Social Security number to obtain employment, that he had been fired from or quit without good reason three of his last four driving jobs, that he had lied in his application to work for Sugar Transport, and that, when Sugar Transport had sought information from Carcamo's prior employers, the lone response gave him a very negative evaluation.  

Sugar Transport opposed instructing the jury on plaintiff's negligent retention and hiring claims, arguing that its offer to admit vicarious liability barred such instructions. It also sought a mistrial, claiming the prior-accident evidence had been highly prejudicial. Its efforts failed. Before closing arguments, Sugar Transport stipulated with plaintiff to vicarious liability for employee-driver Carcamo's negligence, if any.  

The jury found that defendants Tagliaferri and Carcamo had driven negligently, that defendant Sugar Transport had been negligent in hiring and retaining Carcamo as a driver, and that the retention was a cause of plaintiff's injuries. The jury allocated fault for the accident among all three defendants: 45 percent to Tagliaferri, 35 percent to Sugar Transport, and 20 percent to Carcamo. It awarded plaintiff over $ 17.5 million in economic damages and $ 5 million in non-economic damages. The trial court entered a judgment in the form required by California Civil Code sections § 1431.1-1431.5 (Proposition 51). Under the judgment, Tagliaferri and Sugar Transport were each jointly liable for all of plaintiff's economic damages but only severally liable for part of her non-economic damages--Tagliaferri for 45 percent and Sugar Transport for 55 percent (its 35 percent plus its employee Carcamo's 20 percent).  

The Court of Appeal affirmed the trial court acknowledging the California Supreme Court's 1954 holding in Armenta, supra, 42 Cal.2d 448, that if an employer admits vicarious liability for its employee's negligent driving, a plaintiff cannot rely on a negligent entrustment claim to support introduction of evidence of the employee's driving record. It also recognized that in Jeld-Wen, supra, 131 Cal.App.4th 853, another Court of Appeal had applied Armenta in directing dismissal of a negligent entrustment claim. The Jeld-Wen court rejected a claim that Armenta, which was decided in 1954, before the 1970's development of comparative negligence rules, had been "adversely affected" by those rules. (Jeld-Wen, supra, at pp. 870-871.) The Court of Appeal in the underlying opinion distinguished Armenta because it involved negligent entrustment rather than negligent hiring and it did not involve an allocation of comparative fault. And in disagreeing with Jeld-Wen, the Court of Appeal below stated (mistakenly) that Jeld-Wen had not "purport[ed] to deal with the allocation of fault required by Proposition 51." Id.  

Because the Court of Appeal's decision conflicted with Jeld-Wen, and cast doubt on the viability of the holding in Armenta, the Supreme Court granted the petition for review of defendants Sugar Transport and Carcamo.  

Negligent Entrustment and Respondeat Superior  

The court discussed the genesis of its opinion in Armenta. In that seminal case, the court held that admission of vicarious liability made the negligent entrustment claim irrelevant. (Armenta, supra, 42 Cal.2d at p. 457.) Consequently, once the employer made an offer to admit vicarious liability for any negligence of its employee-driver, the trial court was required to withhold plaintiff's negligent hiring and retention claims from the jury, and to exclude the evidence plaintiff offered to support those claims, including the employee's poor driving record and employment history, his dishonesty, and his status as an illegal alien and resultant use of a "phony" Social Security number to obtain employment.  

Vicarious liability and negligent entrustment are alternative theories under which liability may be imposed on an employer. The employer's admission of vicarious liability, removed the legal issue of liability from the case leaving no material issue to which the proffered damaging evidence could be legitimately directed.  

The respondeat superior doctrine makes an employer liable, irrespective of fault, for an employee's tortious conduct in the scope of employment. (Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 209 [285 Cal. Rptr. 99, 814 P.2d 1341].)  

The Supreme Court also noted that Armenta, reflects the majority view among American jurisdictions. (Mincer, The Viability of Direct Negligence Claims Against Motor Carriers in the Face of an Admission of Respondeat Superior (2010) 10 Wyo. L.Rev. 229, 235.)  

Effect of "Pure" Comparative Fault  

When the Armenta case was decided in 1954, California courts imposed tort liability for a plaintiff's injuries on an "all-or-nothing" basis. (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 583, 591-598 [146 Cal. Rptr. 182, 578 P.2d 899] (American Motorcycle); Li, supra, 13 Cal.3d at pp. 809-811 & fn. 3.) If "the plaintiff's fault had contributed in any measure to his own injury, his recovery was barred," while "every defendant found somewhat responsible for an indivisible injury, no matter how slight his or her fault, was liable for all the damages." (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 597 [7 Cal. Rptr. 2d 238, 828 P.2d 140] .  

In that system, once an employer admitted vicarious liability for an employee's tortious conduct within the scope of employment, it did not matter, for purposes of a plaintiff's recovery, whether a trial court submitted to the jury a negligent entrustment claim against the employer along with the negligence claim against the employee. Either vicariously under the respondeat superior doctrine, or "directly" on a negligent entrustment claim, the employer would be liable for 100 percent of a plaintiff's damages, or else not liable at all.  

In 1975, the California Supreme Court adopted "pure" comparative negligence in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226]. In Li, the court replaced the old all-or-nothing system of tort liability with a comparative fault system "under which liability for damage will be borne by those whose negligence caused it in direct proportion to their respective fault." (Li, supra, 13 Cal.3d at p. 813.) Under comparative fault principles, a plaintiff's negligence no longer bars recovery, but reduces "the damages awarded ... in proportion to the amount of negligence attributable to the [plaintiff]." (Id. at p. 829.) Three years later, the court eliminated the all-or-nothing character of the common law doctrine of equitable indemnity. (American Motorcycle, supra, 20 Cal.3d at p. 583.)  

In 1986, California voters further limited the all-or-nothing character of tort liability by adopting Proposition 51 which provides that in cases based upon principles of comparative fault, each defendant is liable for all the plaintiff's economic damages but only "for the amount of non-economic damages allocated to that defendant in direct proportion to that defendant's percentage of fault. (Civ. Code, § 1431.1, subd. (c)).  

Because Proposition 51 applies only to "independently acting tortfeasors who have some fault to compare," the allocation of fault it mandates cannot encompass defendants "who are without fault and only have vicarious liability." (Rashtian v. BRAC-BH, Inc. (1992) 9 Cal.App.4th 1847, 1851 [12 Cal. Rptr. 2d 411] [Prop. 51 did not apply to a vehicle owner vicariously liable for permissive user's negligence].  

One type of defendant excluded from allocations of fault under Proposition 51 is an employer who faces only vicarious liability under the respondeat superior doctrine for torts committed by its employees in the scope of employment. (Miller v. Stouffer (1992) 9 Cal.App.4th 70, 83 [11 Cal. Rptr. 2d 454].)   

The question presented in this case was whether plaintiff's assertion of an additional claim against the employer--for negligent entrustment, hiring, or retention--required a different approach to allocating fault.  

Plaintiff's Ancillary Challenges  

The Court discussed and dismissed plaintiff's contention that there was a difference between negligent hiring and negligent entrustment, stating, "Awareness, constructive or actual, that a person is unfit or incompetent to drive underlies a claim that an employer was negligent in hiring or retaining that person as a driver. (See Judicial Council of Cal. Civ. Jury Instns. (2010) CACI No. 426.)".  

Plaintiff's procedural argument that the defense forfeited its right to invoke the holding in Armenta by not admitting vicarious liability before trial, as did the defendants in Armenta and in Jeld-Wen, was also rejected by the Court which noted that neither decision required such admissions to be made before trial.  

The plaintiff also unpersuasively argued that defendant-employer forfeited its right to invoke the holding of Armenta by not moving to bifurcate the trial into two separate parts: one pertaining to the negligent driving cause of action against the employee-driver and the other on the negligent hiring and retention against the employer. The Court held that an employer's admission of vicarious liability for its employee's negligence made claims of negligent entrustment, hiring, or retention irrelevant and therefore, no reason existed to try such claims at all, whether separately from the negligence claim or at the same time.  

Effect of Changes to Comparative Fault and Joint Liability  

The court next discussed whether its 1954 holding in Armenta, supra, 42 Cal.2d 448, had been undermined by the adoption of comparative fault principles and by the adoption of Proposition 51, with its related limit on joint liability.  

Plaintiff argued that if Proposition 51 applied to limit a defendant's liability for non-economic damages, necessitating an allocation of fault, then the principles of California's comparative fault system required the trial court to include both the employer and its employee-driver in the universe of tortfeasors' to whom the jury will allocate fault. Consequently the jury could hold the employer responsible for two shares of fault: one based on the employee's negligent driving in the scope of employment, for which the employer is liable vicariously, and one based on the employer's own negligence in choosing a driver, for which the employer is liable "directly." Plaintiff argued that excluding the employer's independent fault for its negligence in hiring and retention would distort the process of allocating fault by removing a party who is at fault from the universe of tortfeasors.  

The Court disagreed holding that while negligent entrustment may establish an employer's own fault, it should not impose additional liability; instead, the employer's liability cannot exceed that of the employee. Jeld-Wen, supra, 131 Cal.App.4th 853.  

As Jeld-Wen noted, if an employer admits vicarious liability for its employee's negligent driving in the scope of employment, "the damages attributable to both employer and employee will be coextensive." (Ibid.) Thus, when a plaintiff alleges a negligent entrustment or hiring cause of action against the employer and the employer admits vicarious liability for its employee's negligent driving, the universe of defendants who can be held responsible for plaintiff's damages is reduced by one--the employer--for purposes of apportioning fault under Proposition 51. The practical effect of this determination is that the employer will not be mentioned on the special verdict form. The jury must apportion fault for the accident among the listed tortfeasors, and the employer is liable only for whatever share of fault the jury assigns to the employee.  

As the Court noted, its conclusion finds support in decisions of other state courts that have adopted or retained the majority rule that a defendant-employer's admission of vicarious liability bars claims for negligent entrustment, hiring, or retention. The relevant decisions fall into two categories:  

(1) those in which a state court that already used a system of comparative fault adopted the majority rule (McHaffie v. Bunch (Mo. 1995) 891 S.W.2d 822, 826; Willis v. Hill (Ga.Ct.App. 1967) 116 Ga. App. 848 [159 S.E.2d 145, 160], revd. on other grounds (Ga. 1968) 224 Ga. 263 [161 S.E.2d 281]).  

(2) those in which a state court, having first adopted the majority rule and having later adopted comparative fault, then chose to retain the majority rule as this court did. (Gant v. L.U. Transport, Inc. (Ill. App. 2002) 331 Ill. App. 3d 924 [770 N.E.2d 1155, 1159-1160, 264 Ill. Dec. 459]; Loom Craft Carpet Mills, Inc. v. Gorrell (Tex. App. 1992) 823 S.W.2d 431, 432).  

Prejudice 

Finally, the Court addressed the issue of whether the employer had been prejudiced by the trial court's rulings. Plaintiff offered evidence of the driver's past accidents, including one in which he was at fault and another that had occurred just 16 days before the accident. To further support the negligent hiring claim, plaintiff offered evidence of the driver's poor employment record including the fact that as a person illegally in this country, he had used a false Social Security number to get hired; he had been fired from (or quit without good reason) three of his last four driving jobs; and he had lied in his application to work for the employer. In addition, plaintiff presented extensive testimony about the employer's inadequate hiring practices, thereby making the company appear indifferent to the need to screen or train drivers for safety.  

The Court concluded that all of that evidence should have been excluded after the employer offered to admit vicarious liability and that had that evidence been excluded, and had the special verdict form not listed defendant-employer the employer as a separate tortfeasor from driver-employee, it was reasonably probable that the jury would have reached results more favorable to one or both defendants.  

Conclusion  

The opinion provides clear direction to defense counsel on how to attack the dual theories of negligent entrustment and vicarious liability. By limiting a plaintiff's claims to respondeat superior, there is a strong likelihood that damaging evidence can be excluded and that a more favorable verdict form can be submitted to the jury.  

David Strong is the managing partner and head of the litigation department with Branson, Brinkop, Griifith & Strong in Redwood City, CA.  His clients include a national waste disposal company.  He has been chosen as a Northern California Super Lawyer from 2005-2011.  For information, please see our website at www.bbgslaw.com or contact Mr. Strong directly at dstrong@bbgslaw.com. 

 

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