Joint and several liability
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Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be:
- jointly liable
- severally liable
- jointly and severally liable
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[edit] Joint liability
If parties have joint liability, then they are each liable up to the full amount of the relevant obligation. So if a husband and wife take out a loan from a bank, the loan agreement will normally provide that they are to be "jointly liable" for the full amount. If one party dies, disappears or is declared bankrupt, the other remains fully liable. Accordingly, the bank can sue one, or other, or both, for the full amount. However, in suing, the creditor only has one course of action, i.e., the creditor can only sue for each debt once. If, for example, there are three partners, and the creditor only sues two of them for the outstanding loan amount and cannot recover the full amount, he cannot recover the remaining amount from the partner who is left out of the lawsuit.
[edit] Several liability
The converse is several liability, where the parties are liable for only their respective obligations. A common example of several liability is in syndicated loan agreements, which will normally provide that each bank is severally liable for its own part of the loan. If one bank fails to advance its agreed part of the loan to the borrower, then the borrower can only sue that bank, and the other banks in the syndicate have no liability.
[edit] Joint and several liability
Joint and several liability is a hybrid of both; with respect to the claimant, the parties are jointly liable, but as between obligors themselves, the liabilities are several. This means that if the claimant pursues one party, and receives payment in full, that party can then pursue the other obligors for a contribution to their share of the liability.
Joint and several liability is most relevant in tort claims, whereby a plaintiff may recover all the damages from any of the defendants regardless of their individual share of the liability. The rule is often applied in negligence cases, though it is sometimes invoked in other areas of law. In the United States, forty-six of the fifty States have a rule of joint and several liability, although in response to tort reform efforts, some have limited the applicability of the rule.
[edit] Criticisms of joint and several liability
Joint and several liability is premised on the theory that the defendants are in the best position to apportion damages amongst themselves. Once liability has been established and damages awarded, the defendants are free to litigate amongst themselves to better divide liability. The plaintiff no longer needs to be involved in the litigation and can avoid the cost of continuing litigation.
Defenders of the principle of joint and several liability further argue that it protects victims from being undercompensated if one of the defendants can not pay his or her share of proportionate liability.
Opponents of the principle of joint and several liability note that its use (instead of proportionate responsibility) has led to cases in which a party with a very minor part of the responsibility unfairly shoulders the burden of damages. The classic example is the uninsured drunk driver who injures someone; the plaintiff will sue both the insolvent drunk driver and the state highway department (or automobile manufacturer), hoping to hold the latter 1% or 2% responsible yet forcing them to pay the entire award. Joint and several liability, reform supporters argue, leads to lawyers searching for "deep pockets" to sue (in the expectation that they will settle rather than risk trial), even though those defendants may only be remotely related to an incident.
According to Richard Wehe, Assistant Chief Counsel at the California Department of Transportation, (Caltrans), "I can tell you that in many, many settlement conferences or mediations I am confronted with plaintiff's lawyer's statements that, 'I only need to establish that the state is 1 % at fault and I can recover all of my economic damages.'"[1]
Where a financially wealthy defendant can be joined as a defendant, a plaintiff has a greater chance of recovering damages than when the defendants are financially insolvent, or judgment proof.
[edit] Example
If Ann is struck by a car driven by Bob, who was served in Charlotte's bar (and the state has dramshop laws), then both Bob and Charlotte may be held jointly liable for Ann's injuries. The jury determines Ann should be awarded $10 million and that Bob was 90% at fault and Charlotte 10% at fault.
- Under joint and several liability, Ann may recover the full damages from either of the defendants. If Ann sued Charlotte alone, Charlotte would have to pay the full $10M despite only being at fault for $1M. (However, in most jurisdictions, Charlotte would be able to join Bob as defendant in Ann's suit against her. Charlotte would also have a separate action against Bob for $9M, though she would remain liable to Ann for the full $10M.)
- Under proportionate liability, Bob would have to pay $9M and Charlotte would have to pay $1M. If Bob does not have any money, Ann only gets the $1M from Charlotte.
[edit] See also
- Tort reform
- Walt Disney World Co. v. Wood, 489 So. 2d 61 (Fla. Dist. Ct. App. 1986).
