In one case, a California plumbing company hired a man who had a prior conviction for domestic violence. A few years later he met a female customer during a house call; their relationship eventually became romantic after he was fired for drug and alcohol use and alleged threats toward a co-worker. When the relationship ended, the woman sought a restraining order and the man later killed her; he was convicted of the crime.
The victim’s daughter sued the plumbing company for negligent hiring. Although that suit was unsuccessful, the case shows how businesses can be vulnerable to claims based on the actions of employees.
Factors courts consider
- Whether the employer knew or reasonably should have known the person was unfit for the job and dangerous. For example, an accounting firm that knowingly hires someone with a prior embezzlement conviction could face liability if a client later suffers a loss.
- Whether the employer should have foreseen that the employee would harm someone. The court in the California case rejected the argument that the employer should have anticipated the employee turning violent two years after being fired.
- Whether the employer’s act caused the victim’s injury. Courts often look for a clear causal link between hiring and the harm; in the plumbing case the court found the relationship developed outside work duties and after the employee was fired, so the hiring did not cause the death.
There are two main insurance approaches businesses use to protect against claims arising from employee actions. For incidents involving bodily injury or property damage, a Commercial General Liability policy might provide coverage, though some policies exclude employment-related claims. See Hiring (Insurance) for related coverage considerations.
Losses that do not involve bodily injury or property damage—such as embezzlement—would not be covered by CGL. Employee Dishonesty insurance might cover theft or fraud by employees, and some Employment Practices Liability policies can be endorsed to cover liability to non-employees. For broader policy topics, consult Insurance overview: workers' comp, vehicle classification, environmental liability, home buying.
Businesses should review with an insurance agent to confirm they have proper coverage and to understand any exclusions or endorsements that apply.
Insurance is not a substitute for careful hiring practices. Conducting a thorough background check, checking references, and documenting hiring decisions reduce the likelihood of negligent hiring claims and help protect morale, reputation, and the ability to recruit skilled employees.
Frequently Asked Questions
What does “negligent hiring” mean?
Negligent hiring is a claim that an employer failed to reasonably screen an employee who then caused harm; courts consider whether the employer knew or should have known about risks. It focuses on the employer’s hiring decisions and foreseeability of harm.
Can insurance cover negligent hiring claims?
Coverage depends on the policy and the nature of the loss; CGL covers bodily injury or property damage in some cases, while Employee Dishonesty and Employment Practices Liability policies may respond to other types of claims with appropriate endorsements.
What steps can a small business take to reduce risk?
Perform background and reference checks, maintain clear hiring documentation, train managers on screening procedures, and verify appropriate insurance coverages to address potential risks.
When should I talk to an agent about coverage?
Discuss insurance needs when hiring for positions with access to customers, funds, or sensitive information, and whenever your business operations change in ways that could increase exposure.