Legal Definitions - derivative liability

Derivative liability refers to the legal responsibility for a wrong that someone other than the person wronged has the right to seek redress for. For example, if a shareholder believes that a corporation's directors have breached their fiduciary duty, the shareholder can sue on behalf of the corporation to recover damages. Another example is when a widow sues for wrongful death on behalf of her deceased spouse.

Derivative liability is different from direct liability, which is when a person is responsible for their own actions. In derivative liability, the person seeking redress is not the one who was directly wronged, but rather has a legal right to sue on behalf of the wronged party.

For instance, in a shareholder's derivative suit, the shareholder is suing on behalf of the corporation, which is the entity that was directly wronged. The shareholder is seeking to recover damages for the corporation, not for themselves personally.