When it comes to liability insurance, especially for contractors, there are certain exclusions that can significantly impact coverage. “Action Over” claims and Employee Injury Exclusions are two critical areas to be aware of, especially if you operate in New York.
What is an Employee Injury or ‘Action Over’ Claim?
An “Action Over” claim arises when an employee of a subcontractor (or sometimes even a temporary worker or volunteer) sues the general contractor or property owner for injuries sustained on the job. These lawsuits often allege negligence on the part of the general contractor or owner, even if workers’ compensation covered the employee’s initial medical expenses and lost wages.
Why is This a Coverage Issue?
- Workers’ Compensation vs. Liability: Workers’ compensation insurance is designed to cover employees’ injuries, regardless of fault. However, liability insurance (like Commercial General Liability or CGL) covers injuries to third parties. An “Action Over” claim blurs this line, as the employee is technically covered by workers’ comp but is suing as if they were a third party.
- Exclusions: Many CGL policies contain exclusions that limit or eliminate coverage for “Action Over” claims. This means that if an employee of a subcontractor sues you, your CGL insurance might not pay for your legal defense or any settlement.
The New York Factor
New York State Labor Law, particularly sections 200, 240, and 241, places specific duties and responsibilities on general contractors and property owners to ensure workplace safety. These laws can increase the likelihood of “Action Over” claims in New York, making the presence of an Employee Injury Exclusion even more critical.
How to Identify These Exclusions
- Policy Review: Carefully examine your CGL policy for exclusions related to “employee injury,” “action over,” or “labor law.”
- Endorsements: Check for any endorsements that modify or add such exclusions.
- Certificate of Insurance: While a certificate of insurance provides a summary, always request and review the full policy to confirm coverage.
What Can You Do?
- Secure Appropriate Coverage: If you work in New York, ensure your CGL policy does not contain broad “Action Over” or Employee Injury Exclusions. Seek out carriers that offer coverage for these claims.
- Contractual Risk Transfer: Use well-drafted contracts with subcontractors that clearly define responsibilities, require adequate insurance from the subcontractor, and include indemnification clauses.
- Safety Practices: Implement and enforce robust safety protocols to minimize the risk of employee injuries.
Proper Maintenance/Risk Mitigation
- Policy Audits: Regularly review your insurance policies with your agent to ensure adequate coverage.
- Subcontractor Vetting: Thoroughly vet subcontractors to ensure they have proper workers’ compensation and liability insurance.
- Safety Training: Provide comprehensive safety training to all employees and subcontractors.
Conclusion
“Action Over” claims and Employee Injury Exclusions can create significant liability risks for contractors, especially in New York. By understanding these exclusions, securing the right coverage, and implementing strong safety practices, you can protect your business from potentially devastating financial losses.