Joint Liability
Categories: Insurance, Regulations
You and a partner run a hot manufacturing business. It turns out that some of the pigeon parts you used to make the hot dogs had an avian form of the plague. Now the two of you are being sued.
It's determined that you and your partner share joint liability. That distinction means that together you have to pay whatever penalties and restitution the court levies against you.
When the verdict comes in that you owe your former customers $5 million in damages, the two of you together have to pay that. You can split it 50/50 or you can haggle about who bought what pigeons from which pigeon suppliers. Maybe you'll pay $2 million and your partner will pay $3 million. Whatever the split you guys eventually figure out, the judgment is shared by the two of you.
Other options for liability include "severally liable" and "joint and severally liable."
In severally liable, each of you would only be responsible for your share of the liability. The court would determine each party's contribution to the situation and divvy up the damages based on those findings.
In the joint and severally liable situation, you are each potentially responsible for the entire liability. Your former customers could sue each of you individually and possibly win a $5 million verdict against each of you.