California Supreme Court Decision Affects Transportation Cases and Other Employer Liability Claims

The California Supreme Court recently issued an important decision affecting an employer’s potential liability for negligent entrustment, retention, and/or hiring. In Diaz v. Carcamo, the Court held that when an employer admits vicarious liability for any negligence by its employee, the plaintiff can no longer pursue the negligent entrustment, etc., claims against the employer. The specific facts of the case make it of particular note to the transportation industry.

Plaintiff Diaz was in a car accident with Defendant Carcamo, a truck driver working for Sugar Transport of the Northwest, LLC, and Defendant Tagliaferri. Tagliaferri pulled into Carcamo’s lane, hit Carcamo’s truck, spun, flew over the divider, and hit Plaintiff’s vehicle, injuring Plaintiff. Plaintiff sued Tagliaferri, Carcamo and Sugar. Plaintiff alleged Sugar was vicariously liable for its employee Carcamo’s negligent driving and directly liable for its own negligence in hiring and retaining him.

Sugar offered to admit vicarious liability if Carcamo was found negligent. It argued that would bar Plaintiff’s claims for negligent entrustment, hiring and retention. It also objected to evidence being admitted to support those claims, namely that: Carcamo had two prior accidents, including one a mere sixteen days before the subject accident; was in the country illegally with a fake Social Security number; had been fired from or quit without good cause three of his last four driving jobs; had lied in his application to Sugar; Sugar had only received a negative evaluation when it sought information from Carcamo’s prior employers; and Sugar had not properly investigated Carcamo’s job history. It further objected to a jury instruction on the negligent retention and hiring claims. Sugar stipulated to vicarious liability before closing arguments.

Despite Sugar’s objections, the trial court allowed Plaintiff to introduce all of the evidence regarding Carcamo’s prior accidents, immigration status, etc., and the Court instructed the jury on the negligent entrustment and hiring causes of action against Sugar. The jury then found Carcamo 20% liable, Sugar 35% and Tagliaferri 45%. That meant Sugar was severally liable for 55% of the $5 million noneconomic damages award and Sugar and Tagliaferri were each jointly liable for Plaintiff’s $17.5 million in economic damages.

The court of appeal affirmed and Sugar appealed. The Supreme Court reversed the Court of Appeal and ordered it to remand the case for a retrial.

The Court held that no matter how negligent an employer may be in entrusting a vehicle to an employee or in hiring a particular employee, it is only if the employee then drives negligently that the employer could be held liable for negligent entrustment, hiring or retention. If the employee does not drive negligently, the employer will not be liable, even if it entrusted its vehicle to an employee whom it knew or should have known had a history of accidents and carelessness.

The Court further reasoned that if the employer offers to admit vicarious liability for its employee’s driving, then negligent entrustment, hiring, or retention claims become superfluous. These would expose the employer to additional fault, beyond that of the employee. It would be inequitable for the employer to receive a share of fault greater than that assigned to the employee whose negligence caused the accident. Whether the offer to admit vicarious liability occurs at trial or before trial does not matter.

The Court thus concluded that the trial court’s decision to allow Plaintiff’s evidence in support of his negligent entrustment claims was an error. The use of a special verdict form listing Sugar as a separate tortfeasor from Carcamo was also an error. The evidence of Carcamo’s poor driving record and employment history, his dishonesty and his status as an illegal alien should have been excluded. Evidence of an employee’s past negligence is highly prejudicial and the Court reasoned the jury would probably have reached a different result on whether Carcamo drove negligently had the evidence been excluded. Moreover, the jury would probably have allocated Sugar a lower percentage of fault if it had not been separately listed on the verdict form. Therefore, the Court remanded the case for a new trial.

We wanted to make you aware of this important decision which will have broad effect on transportation cases and other employer liability claims generally in California. If you have any questions or would like to discuss the case further, please contact: Norman A. Ryan, Marco B. Mercaldo or Allie A. Umoff.