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Recognizing and Minimizing Tort and Regulatory Risk Plan

All businesses strive to achieve clean operational track records where they can match up with market leaders in their respective industries. One of the ways current businesses make sure they are up to date with global standards is in ensuring that they conduct business in a properly strategized manner. This can be done by implementing excellent practices. “A tort is an act by a business that results in injury to a person, property, or good name. In most cases, the person injured is entitled to compensation” (Jennings, 2006). Businesses exist for the sole purpose of either making products or services to sell to the public. The public purchases these commodities based on preference and a company’s good name. When a company violates the public’s trust by placing a defective product or violates laws, rules, and federal regulation, they subject themselves to liabilities. Some direct impacts of forgoing the correct production rules or regulations can subject a business entity to monetary damages, fines, and a public bad name. Therefore businesses are required to have precautionary plans in place for the reasons of regulation conformity or tort accountability (Dore, 2008).

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Preventative measures, check, and balances to avoid a downfall

Good practice needs to be proactive while having a plan containing precautionary measures to ensure that all torts and industrial regulations are understood upfront. This is in case the business may encounter such a problem as the violation of federal regulations. Because of this, business entities need to issue, a detailed plan consisting of preventative measures that are supposed to be embraced to avoid a violation of government regulatory guidance and civil liability. Before doing this, businesses need to, first of all, recognize what torts and regulations their industry must comply with.

First and foremost a company or business has the ultimate responsibility to its workers to ensure there is a safe environment to conduct safe day-to-day operations. Secondary to that, each employee should ensure that sound quality practices conforming to company standards are always conducted regardless of their personal opinions. All businesses are charged with the responsibility of ensuring that all products sold comply with federal and local standards. It is paramount that every employee, top to bottom be educated on why they need to comprehend the laws and regulations that could put the business at risk if not properly followed. A subject matter expert or instructor needs to be able to train employees, and educate them on the management of federal, state, and local sets of laws. “The person should also be responsible for having knowledge on environmental laws including the Clean Air Act, the Clean Water Act, Environmental Protection laws, Safe Drinking Water Acts, and proper disposal of trash and waste” (Dore, 2008).

Common business torts and measures to manage

In the case of Alumina Incorporated, we find that it has the potential to subject itself to the following liabilities according to the presented scenario: negligence, strict liability, invasion of privacy, and punitive damages.


Negligence is one of the most popular and most common grounds plaintiffs use against a business (Abraham, 2009). Negligence occurs when a business allows the quality of a product to be interfered with, or when the correct production steps are not followed to ensure that quality control is maintained. In this case, Kelly Bates asserts that Alumina Incorporated was not compliant with the EPA (Environmental Protection Agency) lawful boundary of manufacturing waste matter. This caused contamination in the drinking water in Lake Dira causing leukemia in her 10-year-old daughter. The plaintiff filed a million-dollar personal injury lawsuit against Alumina with the hope of recovering, compensatory and punitive damages (Business Regulation Simulation, 2009). The complaint states that Alumina effluents levels were above the limits set by the EPA today, and five years ago. A routine test was conducted by the EPA and it was determined that Alumina violated regulations by producing effluents above the legal limits. As a result, Alumina was ordered to clean up the water in the lake. After an audit was conducted and the clean-up the clean up was completed, it was determined that the problem had been corrected. A plaintiff must prove that there is a link between EPA violations and leukemia. The plaintiff also bears the responsibility to prove that Alumina is not in compliance with EPA standards. Alumina, on the other hand, had an independent study performed that tested the water for compliance to EPA standards. The study determined that the levels were within EPA limits (Business Regulation Simulation, 2009).

Firm liabilities

When a company follows industrial standards or does not violate any laws, it may still be held liable under strict tort liability. Strict liability states that a company’s actions alone create liability regardless of a fault (Jennings, 2006). Alumina could be held responsible because, car parts supplied by the company contributed to increased traffic, which consequently caused unsafe drinking water (Levmore, 2009). Seeking solid legal counsel could allow Alumina to transfer the risk to other companies who use their products.

Invasion of Privacy

A potential option that Alumina may want to consider would be to investigate the plaintiff. This is a very tricky road because investigating the plaintiff is not the best practice unless Alumina believes the plaintiff’s claim has the potentiality for an element of fraud. The investigation must be conducted by a licensed private investigator and not by Alumina. A written formal policy should be in effect by Alumina to establish procedures for cases where fraud is suspected, and not in cases where punitive damages are likely (Baglione, 2008).

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Punitive harm

“The Safe Drinking Water Act of 1986 provides the EPA to set standards and regulate drinking water” (Jennings, 2006). Oil Pollution Act (OPA) on the other haThe lawsuit states that Alumina is liable for the violation because of “repeated violations” of producing effluents above the EPA legal limits. There is no evidence of repeated violations though. The investigation reports show Alumina is incomplete EPA compliance. The violation cited over five years ago shows that Alumina is open for liability (Melnitzer, 2009).nd, sets criminal liability for oil spills, Endangered Species Act (ESA) cuts down business activity if it brings harm to endangered animal species, Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) deals with hazardous waste site cleanups, and Resource Conservation Recovery Act (RCRA) regulates hazardous waste by issuing permits (Jennings, 2006).

Ways to manage torts and potential regulatory risks

The Clean Water Act and Safe Drinking Water Act are regulations that affect Alumina’s industry. Alumina has in the past had violations of these regulations. It is therefore very important that Alumina maintains a comprehensive understanding and knowledge of the above regulations. The company needs to have an Internal Control Checklist and an internal auditor to ensure compliance is held within the regulatory requirements, identify deficiencies, and provide corrective action. The company must also ensure that they maintain records verifying all actions taken in the event they are found to be out of compliance.


In a synopsis, Alumina now has a tort and a regulatory risk plan in writing which has also been implemented. The plans’ primary existence is to ensure that future lawsuits, mentalities, and fines are mitigated. The plan will also guarantee preventative measures, checks, and services or testing are conducted to ensure risks are minimized. The ultimate significance of this plan is to guarantee that Alumina is doing a profitable business that conforms to all set rules, standards, and regulations. In so doing it would uphold its good name with all its stakeholders.


Abraham, K. (2009). Custom, Noncustomary Practice, and Negligence. Columbia Law Review, 109(7), 1784-1822. Web.

Baglione, S. (2008). Employee benefits and work conditions by demographic categories. Journal of the Academy of Business & Economics, 8(3), 19-32.

Business Regulation Simulation. (2009). Web.

Dore, S. (2008). Risk management basics. Office of Financial Management, State of Washington. Web.

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Jennings, M. (2006). Business: Its Legal, Ethical, and Global Environment (7th ed.). Stamford, Connecticut: Cengage Learning.

Levmore, S. (2009). Stipulated damages, super-strict liability, and mitigation in contract law. Michigan Law Review, 107(3), 1365-1379.

Melnitzer, J. (2009). Punitive power. Inside Counsel. 20(212), 32-34.

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