For contractors operating in New York, few risks are as financially dangerous—and as widely misunderstood—as “action over” claims. These claims arise when an injured worker sues a third party (such as a property owner or general contractor), and that third party then brings a claim back against the injured worker’s employer. The result is a potentially catastrophic liability scenario that many contractors assume is covered under their Commercial General Liability (CGL) policy—only to find out too late that it may not be.
Understanding how action over claims work, and more importantly, how your CGL policy responds (or fails to respond), is critical for any contractor working in New York.
What Is an Action Over Claim?
Under normal circumstances, when an employee is injured on the job, their exclusive remedy against their employer is workers’ compensation. This system is designed to prevent lawsuits against employers while ensuring injured workers receive medical care and lost wage benefits.
However, New York’s Labor Law—particularly Sections 240(1) and 241(6)—creates a unique exception. These statutes impose strict liability on property owners and general contractors for gravity-related injuries and violations of the Industrial Code.
Here’s where action over comes into play:
- An employee of a subcontractor is injured on a job site.
- The injured worker sues the property owner and/or general contractor under Labor Law.
- The owner or GC then files a third-party claim (an “action over”) against the subcontractor (the injured worker’s employer), seeking indemnification or contribution.
This effectively bypasses the workers’ compensation shield and pulls the employer back into the lawsuit—often for substantial damages.
Why Action Over Claims Are So Dangerous
Action over claims can lead to extremely high settlements or verdicts because:
- Labor Law 240(1) imposes absolute liability in many cases
- Comparative negligence is often not a defense
- Claims frequently involve severe injuries (falls from heights, falling objects, etc.)
- Indemnification agreements may require the subcontractor to assume full responsibility
For subcontractors, this means they could be responsible not only for their employee’s injury but also for the legal liability of the owner and general contractor.
The Misconception: “My CGL Covers This”
Many contractors believe their CGL policy will step in to defend and indemnify them in an action over claim. While this may have been true in older or more comprehensive policies, modern underwriting—especially in New York—has significantly changed the landscape.
Today, many CGL policies include specific exclusions or endorsements that limit or eliminate coverage for exactly this type of exposure.
Common Policy Exclusions That Block Coverage
1. Action Over Exclusions
Some policies explicitly exclude coverage for claims arising out of bodily injury to an employee where a third party seeks indemnification or contribution. This directly targets action over scenarios.
2. Employee Injury Exclusions (Expanded Definitions)
Modern policies often broaden the definition of “employee” to include:
- Subcontractor employees
- Independent contractors
- Leased or temporary workers
This means that even if the injured worker is not your direct employee, coverage may still be excluded.
3. Labor Law Exclusions
Certain carriers add endorsements excluding claims arising under New York Labor Law Sections 240 and 241 entirely. This removes coverage for the very statutes most commonly associated with action over claims.
4. Height Limitations
Policies may exclude work above a certain height (e.g., 10 or 15 feet). Since many Labor Law claims involve elevation-related risks, this can effectively eliminate coverage for common job site exposures.
5. Contractual Liability Limitations
If your indemnification agreement requires you to assume liability for a third party, but your policy restricts contractual liability coverage, you may be left uninsured for those obligations.
Real-World Scenario
Consider a drywall subcontractor working on a mid-rise residential project. One of their employees falls from a scaffold and suffers serious injuries. The worker sues the general contractor and property owner under Labor Law 240(1).
The GC then files an action over claim against the drywall subcontractor, citing the indemnification clause in their contract.
The subcontractor turns to their CGL carrier—only to discover:
- Their policy includes an action over exclusion
- The employee injury exclusion applies to subcontractor employees
- There is a height limitation of 15 feet
The result? No coverage. The subcontractor is forced to defend the claim and potentially pay damages out of pocket.
Why Certificates of Insurance Are Not Enough
Many contractors rely heavily on certificates of insurance as proof of coverage. However, certificates do not reveal critical exclusions or endorsements.
A certificate may show:
- $1,000,000 per occurrence limit
- Additional insured status
- Waiver of subrogation
But it will not disclose:
- Action over exclusions
- Labor Law limitations
- Employee injury carve-outs
This creates a false sense of security that can be devastating when a claim occurs.
Risk Transfer Alone Won’t Save You
While transferring risk through contracts and requiring subcontractors to carry insurance is essential, it is not sufficient on its own.
If:
- The subcontractor’s policy excludes action over claims, or
- The limits are inadequate, or
- The carrier denies coverage
…the financial exposure can shift back to you.
Proper protection requires alignment between contracts and actual policy language, not just certificates.
How Contractors Can Protect Themselves
To avoid being caught uninsured in an action over claim, contractors should take a proactive approach:
1. Review Policy Endorsements Carefully
Do not rely on summaries. Obtain and review full policy forms, especially exclusions related to:
- Employee injury
- Action over
- Labor Law
2. Work With Specialized Brokers
New York construction risks require deep expertise. A knowledgeable broker can identify problematic endorsements and negotiate better terms.
3. Align Contracts With Coverage
Ensure your indemnification agreements are supported by your insurance policy. Otherwise, you may be assuming liabilities your policy won’t cover.
4. Require Strong Subcontractor Coverage
Verify that subcontractors carry:
- No action over exclusions
- Adequate limits
- Proper additional insured endorsements
5. Consider Excess/Umbrella Policies
Even when coverage exists, Labor Law claims can exceed primary limits quickly. Excess coverage provides an additional layer of protection.
Final Thoughts
Action over claims represent one of the most significant uninsured exposures facing New York contractors today. The combination of strict Labor Law liability and increasingly restrictive CGL policy language creates a dangerous gap that many contractors do not discover until it is too late.
The key takeaway is simple: not all CGL policies are created equal. Understanding the exclusions and endorsements in your policy is just as important as knowing your coverage limits.
Contractors who take the time to properly structure their insurance programs—and work with professionals who understand the nuances of New York Labor Law—can avoid devastating financial consequences and operate with greater confidence.
**BGES Group is a leading Construction Insurance specialist serving New York, New Jersey, and Connecticut. We represent over 25 top-rated insurance carriers, providing access to the best general liability and umbrella liability programs available. Our comprehensive coverage options include property, builders’ risk, inland marine, general liability, umbrella liability, commercial auto, bid and performance bonds, workers’ compensation, New York State disability, and group health. Beyond offering policies, we pride ourselves on being highly accessible—by call, text, or email—even on weekends—so you always have a trusted partner to help you navigate any insurance challenge. We are also Workers’ Compensation specialists for tri-state business owners. Whether you are dealing with high premiums, policy cancellations, difficulty obtaining coverage due to losses, audit disputes, or payroll misclassification issues, we can help. We offer specialized programs for industries including auto services, contractors (especially in New York), limousine services, logistics companies, manufacturers, recyclers, and trucking operations. As a “Preferred Agent” for a select workers’ compensation program, we can often secure highly competitive pricing, long-term stability, and multi-state coverage for qualified clients—while also simplifying the audit process and reducing the burden of annual audits.
Contact Us: Gary Wallach Phone: 914-806-5853 (Direct)
Email: bgesgroup@gmail.com
Website: www.bgesgroup.com
Office Location: 216A Larchmont Acres West Larchmont, NY 10538