In New York’s construction industry, one serious accident can change the future of a business overnight. Many contractors believe that if one of their employees is injured, Workers’ Compensation will take care of the claim and the matter ends there. Unfortunately, that is often not the case.
New York’s unique labor laws and contractual indemnification requirements can create what is known as an Action Over claim. These claims have bankrupted contractors, caused insurance premiums to skyrocket, and made it difficult for many businesses to qualify for future projects.
The good news is that many of these costly situations can be minimized—or even avoided—through proper insurance planning, sound contracts, and effective risk management.
Let’s look at several real-world scenarios that demonstrate how Action Over claims develop and the lessons every contractor should learn.
Scenario 1: The Ladder Fall
A painting subcontractor is working inside a commercial office building. While standing on an extension ladder, the employee loses his balance and falls nearly twelve feet to the floor, suffering multiple fractures.
The employee immediately receives Workers’ Compensation benefits from his employer.
Most contractors assume the case ends there.
Instead, the employee files a lawsuit against the property owner and the general contractor under New York Labor Law 240, commonly known as the Scaffold Law. Under this law, owners and general contractors often face significant liability in gravity-related accidents. The owner and general contractor then bring the painting subcontractor back into the lawsuit through contractual indemnification and insurance requirements—creating an Action Over claim. (bgesgroup.com)
Lesson: A simple ladder accident can quickly evolve into a lawsuit involving multiple parties, substantial legal expenses, and potentially millions of dollars in damages.
Scenario 2: Falling Materials
During a renovation project, an electrician is installing conduit while another subcontractor is working several floors above. A heavy pipe slips through an opening and strikes the electrician.
Again, Workers’ Compensation covers the injured employee’s medical bills and lost wages.
The injured worker then sues the building owner and general contractor, alleging an unsafe worksite. The owner and general contractor seek indemnification from the subcontractors involved, and the litigation expands dramatically.
What began as one workplace injury now involves several insurance carriers, multiple defense attorneys, expert witnesses, and years of litigation.
Lesson: Poor coordination between trades and inadequate site safety procedures can dramatically increase exposure for everyone on the project.
Scenario 3: Scaffold Collapse
A masonry subcontractor erects scaffolding for façade work. During the project, part of the scaffold fails, causing several workers to fall.
Because gravity-related accidents receive heightened legal scrutiny in New York, the injured workers sue the owner and general contractor. The subcontractor’s insurance becomes central to the case, particularly if contractual insurance requirements were not properly satisfied.
If liability limits are inadequate or exclusions exist, the subcontractor could face severe financial consequences beyond the insurance available.
Lesson: Before work begins, contractors should verify that their insurance program meets project requirements, including additional insured status, contractual liability, and other required endorsements.
Scenario 4: Certificate of Insurance Problems
A subcontractor submits a certificate of insurance showing $1 million in general liability coverage. The certificate appears acceptable, and the project moves forward.
Months later, an employee suffers a catastrophic injury.
When the claim is presented, everyone discovers the policy contains exclusions or limitations that do not satisfy the project’s insurance requirements. The certificate itself does not change the policy language.
The owner, general contractor, subcontractor, and multiple insurance companies become involved in extensive litigation over coverage obligations.
Lesson: Certificates of insurance are only evidence that a policy exists. They are not the insurance contract. Contractors should always have their policies reviewed to confirm they satisfy contractual obligations.
Scenario 5: Poor Documentation
Following a serious injury, attorneys request safety meeting records, equipment inspection logs, training documentation, photographs, and incident reports.
The contractor has very little documentation.
Without records demonstrating consistent safety practices, defending the claim becomes much more difficult.
Even if the contractor believes proper procedures were followed, proving that fact years later without documentation can be nearly impossible.
Lesson: Strong documentation is one of the most valuable defenses available. Regular safety meetings, written inspections, employee training records, and incident reports can all play an important role during litigation.
Reducing Your Exposure
While no contractor can eliminate every risk, there are several practical steps that can significantly reduce Action Over exposure:
- Carefully review subcontract agreements.
- Verify additional insured and contractual liability requirements before work begins.
- Ensure Labor Law and Action Over exposures are addressed by your insurance program where available.
- Maintain comprehensive jobsite safety programs.
- Document inspections, toolbox talks, employee training, and incidents.
- Work with an insurance broker who specializes in New York construction insurance and understands the complexities of Action Over claims.
Planning before an accident occurs is far less expensive than defending a lawsuit afterward.
How BGES Group Can Help
At BGES Group, construction insurance is not just one of our specialties—it is our primary focus. For more than 45 years, Gary Wallach has helped contractors throughout New York, New Jersey, and Connecticut secure the insurance protection they need to meet demanding contract requirements while managing the unique risks of the construction industry.
We represent more than 50 insurance companies, giving our clients access to competitive programs for General Liability, Umbrella Liability, Workers’ Compensation, Commercial Auto, Builders Risk, Inland Marine, Bid and Performance Bonds, New York State Disability, Group Health, and many other coverages. We also assist contractors with Workers’ Compensation audit disputes, payroll classifications, and risk management strategies.
Whether you’re a small subcontractor or a large general contractor, we’ll review your insurance program, identify potential gaps, and help you obtain coverage that aligns with your business and contractual obligations.
For a complimentary review of your current insurance program, contact:
Gary WallachBGES Group
Phone: 914-806-5853 – Gary Wallach
Email: bgesgroup@gmail.com
Website: www.bgesgroup.com