The New Tort of Negligent Supervision

By Arnold Anderson

Editor's Note: To view Wisconsin statutory materials referenced in this article you must have and/or install Adobe Acrobat Reader 3.0 on your computer.

In Miller v. Wal-Mart Stores Inc.,¹ decided June 24, 1998, the Wisconsin Supreme Court established the tort of negligent supervision in Wisconsin. On the same day Miller was filed, the Wisconsin Supreme Court also handed down Doyle v. Engelke,² which held the insurance company had an obligation to defend the allegation of negligent supervision.

Miller and Doyle establish the elements of the tort of negligent supervision and its application to a liability insurance company's duty to defend. However, much work remains before all the ramifications of these two decisions will be known. This article outlines considerations surrounding negligent supervision claims and what happens when insurance questions are raised in the same case.

Theories of employer liability

Negligent supervision. In Miller, Wal-Mart employees stopped Miller, accused him of stealing a swimsuit, and also created a ruckus in the store's parking lot. No swimsuit was found on Miller. Miller filed an action against Wal-Mart Stores Inc. alleging that the employees unlawfully stopped, detained, searched, and interrogated him, which caused damages. The jury found that Wal-Mart was not liable, through the acts of its employees, for false imprisonment, battery, negligent infliction of emotional distress, and loss of consortium claimed by Miller's spouse. However, the jury found that Wal-Mart was negligent in hiring, training, and supervising its employees and that this negligence was a cause of damage to Miller. The jury also found that Wal-Mart did not have reasonable cause to believe the Miller carried away or concealed unpurchased merchandise, and awarded $20,000 compensatory and $30,000 punitive damages. The trial court entered judgment on the verdict and the court of appeals certified the case to the Wisconsin Supreme Court. The issue was whether the employer had a duty of care with regard to hiring, training, and supervising employees. Miller held there was such a duty.

For the duty to apply, first it must be foreseeable that employees entrusted with specific duties and authority be properly trained and that the failure to do so could result in harm to patrons. Second, if the employer fails to properly hire, train, or supervise employees, it breaches its duty to others. Third, there must be a causal connection between the conduct and the injury. Two questions are necessary to establish causation: Was the employee's wrongful act a cause in fact of the plaintiff's injury? Was the employer's negligence a cause in fact of the employee's wrongful act?

The jury in Miller found the employees were not liable for false imprisonment, battery, or negligent infliction of emotional distress and loss of consortium. However, the jury found Wal-Mart negligent in hiring, training, and supervising the employees and that this negligence was a cause of damage to Miller. Wal-Mart argued that if negligent hiring, training, and supervision was a tort, it should include an element that an underlying tort be committed by the employee. Since the employees in Miller were found to be not liable, then strictly speaking, there was no underlying tort committed by the employees. All of the cases discussing negligent supervision cited in Restatement (2d) of Agency, section 213 (1957), involved employees who had committed a tort or actionable conduct against the plaintiff. Miller sidestepped that issue. Miller did not require an underlying tort: It simply held that a wrongful act is required and the wrongful act need not be a tort. There was a wrongful act by the Wal-Mart employees, which was the basis for the tort of negligent supervision claim. In this fashion, Miller navigated around the fact that the jury exonerated the employees of any tort.

The case was remanded to determine whether the elements of the tort of negligent hiring, training, and supervision outlined in Miller could be met. There was no remand with regard to the damage issues, and that portion of the verdict was affirmed. Wal-Mart also had invoked section 943.50(3) of the Wisconsin Statutes, which immunizes a merchant from civil and criminal liability if the merchant "acts in good faith and any act authorized under this section is immune from civil or criminal liability for those acts." The jury determined that Wal-Mart did not have reasonable cause to believe that Miller had shoplifted, and that part of the verdict was affirmed. Miller also noted that, in an appropriate case, if a merchant is liable for negligent hiring, training, or supervision, the merchant nevertheless may be immune from liability if the merchant meets the elements of section 943.50(3).

Respondeat superior. Miller outlined the necessary elements of negligent supervision. In addition to the tort established in Miller, the principles of agency law also may apply to an employer. Agency law imposes vicarious liability on an employer if an employee is acting within the scope of employment. Thus, in addition to tort law, principles of agency law may impose liability on an employer.

"Therefore, a claim for negligent supervision is distinct from a claim for vicarious liability, in that the former is based on tort principles and the latter is based on agency principles. More specifically, with a vicarious liability claim, an employer is alleged to be vicariously liable for a negligent act or omission committed by its employee in the scope of employment. See Shannon v. City of Milwaukee, 94 Wis. 2d 364, 370, 289 N.W.2d 564 (1980)."³

The liability of an employer for the acts of a servant within the scope of employment has been around for more than 100 years:

"In such a case, where the wrongful act of the servant, though wilful, is strictly within the scope of his employment, it is unnecessary that the master should be at the same time sanctioned nor subsequently ratified of the unlawful act, in order to be held liable for mere compensatory damages ... this is upon the theory that what one does by his servant acting within the scope of his employment and for his benefit is the same, in legal effect, as though done by himself."⁴

Arsand v. City of Franklin⁵reiterated that when respondeat superior applies, the master must pay for the torts of the servant. Agency law will "let the master answer."⁶

The difference in applying respondeat superior and negligent supervision is best illustrated by a hypothetical. Assume the plaintiff was a bar patron and was disturbing patrons by being loud and obnoxious. The bartender-enforcer (employee) got sick of the plaintiff's antics and slammed the plaintiff up against the wall and slapped the plaintiff across the face three or four times causing injury. If the bar owner had instructed the bartender-employee that the bar has a "get tough" policy with loud and obnoxious patrons, and the only way to handle them is to slap them around, then the employee probably was acting within the scope of employment. Vicarious liability (respondeat superior) would attach and the owner is liable. Assume further, however, that the bartender's conduct was so outrageous as to not be considered within the scope of employment. With the new tort of negligent supervision, the employer-owner of the bar still may be found liable for negligent hiring (didn't check to find out if the bartender had done this before); negligent training (hadn't told the bartender not to slap people around); or negligent supervision (turned the bartender loose without any monitoring).

"Knew or should have known" standard. L.L.N. v. Clauder involved negligent supervision of priests. L.L.N. also set out a standard of care for negligent supervision, which appears to be a separate basis upon which liability of an employer can be based:

"Therefore, an employer is liable for negligent supervision only if it knew or should have known that its employee would subject a third party to an unreasonable risk of harm."⁷

This is a third avenue of liability against an employer. The "knew or should have known" standard probably is harder to establish in most cases than the tort outlined in Miller. However, there may be circumstances where the plaintiff will want to apply the "knew or should have known" standard, particularly if the level of culpability is important and punitive damages are being sought. The "knew or should have known" standard also may be relevant to insurance coverage issues.

In the hypothetical concerning the bartender (employee) and the bar owner (employer), if the incident with the plaintiff was the second or third time the bartender had slapped someone around, the court or jury probably could find that the facts come within the "knew or should have known" standard, and liability would be imposed on the employer without the necessity of establishing negligent hiring, training, or supervision.

Verdict form. Litigants in Wisconsin now have at least three theories of recovery against an employer when dealing with employee conduct: 1) the tort of negligent supervision; 2) respondeat superior, that is, the employee acting within the scope of employment when the damage was inflicted; and 3) the employer "knew or should have known" that the employee would subject a third party to an unreasonable risk of harm.⁸

The basic verdict questions concerning negligent supervision follow:

1) Did the employer have a duty to properly hire or train or supervise the employee? If so,

2) Did the employer breach that duty? If so,

3) Was the employee's wrongful act a cause in fact of the plaintiff's damages? If so,

4) Was the employer's negligence a cause in fact of the employee's wrongful act?

5) What amount of money will fairly and reasonably compensate the plaintiff for damages sustained as a result of the employee's (or employer's) conduct?

The doctrine of respondeat superior could add another question to the verdict:

6) Was the employee, at the time of his or her conduct, acting within the scope of his or her employment?

If the answer is yes, there may be no need to go into issues of negligent hiring, training, and supervision. The conduct of the employee within the scope of employment is conduct of the employer.

Finally, if applicable, the jury also may be asked if the employer "knew or should have known" the employee would cause harm or injury.⁹

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