Overview
This article summarizes an employer-liability issue that arose when supervisors engaged in on-the-job misconduct and the company failed to take adequate corrective action.
A jury found the employer liable after concluding that management condoned or ratified the misconduct. The decision highlights how an employer's response to allegations can determine whether it faces direct claims in addition to employment-based defenses.
Key takeaways
- Employers can be held responsible when they authorize or effectively approve intentional wrongdoing by employees.
- Failing to investigate or discipline managers after credible accusations creates risk of ratification claims.
- Clear policies, prompt investigations, and documentation reduce exposure to lawsuits and insurer disputes.
How it works
Courts may impose liability on an employer when an employee’s intentional torts are authorized by the employer or later ratified by its actions or inaction.
Ratification can be shown when an employer knows of misconduct and keeps the worker in a position of authority or does not meaningfully discipline the worker.
Separately, workplace harassment and discrimination claims follow established employment-law standards, and businesses should treat complaints seriously and investigate promptly.
What it may cover (and what it may not)
Some liability policies and specialized coverages respond to allegations of sexual abuse, assault, or intentional torts by employees, but coverage depends on policy language and exclusions.
For businesses with service-oriented exposures, specialized offerings may be available for claims involving intentional misconduct; see Medispa Services Sexual Abuse Coverage for an example of a niche product designed for certain service providers.
Standard employment-practices liability policies typically cover wrongful termination, harassment, and discrimination claims, but not all policies respond to intentional criminal acts or civil penalties.
Insurers also look at employer conduct after notice of a problem; a weak response can jeopardize coverage or lead to coverage disputes.
Common mistakes to avoid
Delaying or failing to investigate complaints thoroughly is one of the most common errors and often shapes legal outcomes against the employer.
Another mistake is leaving accused employees—especially those in supervisory roles—on the job without restrictions while an investigation proceeds.
Employers also err by relying on informal resolution without documenting steps taken, or by failing to consult legal counsel or their insurer when serious allegations surface.
Questions to ask an agent
What types of liability and specialty coverage apply if a manager is accused of intentional misconduct?
Does our current policy exclude claims arising from intentional wrongful acts or criminal conduct by employees?
What documentation and timelines will the insurer expect if a claim is reported?
Are there recommended endorsements or tailored products for my industry? For examples of targeted offerings, review Understanding Sexual Harassment in the Workplace and consider whether a discrimination-focused product is relevant, such as Tenant Discrimination Liability Insurance for Property Managers if your operations include property management risks.
Next steps
Adopt written complaint and investigation procedures that require prompt action, impartial investigation, and clear documentation of outcomes.
Train supervisors on boundaries and on reporting obligations so allegations are escalated instead of being ignored.
Notify your insurer early when serious allegations arise and review policy language with your broker to understand coverage limits and exclusions.
If you need to evaluate coverage or changes, talk to an agent about your options and next steps.
Frequently Asked Questions
Can an employer be liable for an employee's intentional misconduct?
Yes; liability can arise if the employer authorized the act or effectively ratified it by failing to respond after learning of the misconduct.
Does disciplining the employee always eliminate employer liability?
Not always, but timely and documented discipline reduces the likelihood that a court will find the employer ratified the misconduct.
Should I report an allegation to my insurer immediately?
Reporting early is important to preserve potential coverage and to get guidance on claim handling and documentation requirements.
What documentation helps if a complaint is made?
Contemporaneous notes, witness statements, investigation findings, corrective actions, and communications with the complainant and accused are all helpful.