Employer Liability for Employee Actions Does Not Prevent Employer’s Recovery Against the Employee
In Cape & Sons v. Streu Construction (Sept. 9, 2009), the District II Court of Appeals addressed a creative twist on employer liability for employee actions. Cape sued Beaudoin, one of Cape’s employees, and two other companies that colluded with Beaudoin in a bid-rigging scheme that allocated bids to each of the three companies in turn. The defendants argued that the doctrine of respondeat superior (which imputes an employee’s actions within the scope of its employment to its employer) applied to constructively make Cape & Sons part of the bid-rigging process, thereby preventing liability (although the scheme was one of the reasons that Cape & Sons eventually sought bankruptcy protection).
To reverse the trial court’s conclusion that the doctrine applied and prevented Cape & Sons from recovering, the appellate court dusted off an 1866 case (Zulkee v. Wing, 20 Wis. 429) in which the Supreme Court concluded that respondeat superior applies “only as between the master or principal and third persons,” and was not applicable in a suit between an employer and employee.
Cape & Sons victory was not the only September 9 setback for the corporate defendants, who also lost the coverage fight with their insurance companies, leaving payments of about $1.15 million on the table. This second decision is an important lesson for plaintiffs that the language of the complaint is crucial to triggering coverage for defense and/or indemnity purposes.
