In the construction industry, action over claims are a common yet complex issue that can have significant financial implications for contractors in New York. Understanding the roles and responsibilities of each party involved—subcontractor, general contractor, and project owner—is crucial for minimizing risk and ensuring adequate insurance coverage.
The Parties Involved
Subcontractor: The subcontractor is often responsible for specific tasks within a larger construction project. They are typically required to carry general liability insurance and must list both the general contractor and the project owner as additional insureds. Furthermore, the subcontractor must ensure that their coverage is primary and non-contributory, meaning their insurance will respond first in the event of a claim, without seeking contribution from the other parties’ insurance policies. Additionally, the subcontractor is required to carry labor law coverage, which protects against claims arising under New York Labor Laws 240 and 241, which deal with worker safety on construction sites.
General Contractor: The general contractor oversees the entire construction project and coordinates the work of various subcontractors. There is typically an insurance agreement in place between the general contractor and the subcontractor, requiring the subcontractor to carry the aforementioned coverages. This agreement ensures that the general contractor is protected from liability in the event of a claim arising from the subcontractor’s work.
Project Owner: The project owner is the entity financing and commissioning the construction project. Like the general contractor, they are often listed as an additional insured on the subcontractor’s general liability policy, providing them with an added layer of protection against claims.
How Action Over Claims Unfold
Action over claims occur when an employee of the subcontractor is injured on the job, files a workers’ compensation claim, and then pursues legal action against the general contractor and project owner for negligence. Here are two examples of how these claims can play out:
Example 1: A Fall from a Scaffold
A subcontractor’s employee is working on a scaffold when it collapses, causing the worker to fall and sustain serious injuries. The employee files a workers’ compensation claim with the subcontractor’s insurer, receiving benefits for medical expenses and lost wages. However, under New York Labor Law 240 (commonly known as the “Scaffold Law”), the employee also sues the general contractor and project owner, alleging that they failed to provide a safe working environment.
Because the subcontractor had primary and non-contributory coverage in place, their insurance responds first to cover the legal defense and any potential settlement or judgment. The general contractor and project owner are covered as additional insureds under the subcontractor’s policy, which helps protect their own insurance policies from being tapped into. However, if the subcontractor’s coverage is insufficient, the general contractor’s and project owner’s policies could still be at risk.
Example 2: A Falling Object Incident
A worker for the subcontractor is struck by a falling object at the construction site, leading to severe head injuries. After filing a workers’ compensation claim, the employee decides to sue the general contractor and project owner, claiming that they failed to enforce proper safety protocols under New York Labor Law 241.
In this scenario, the subcontractor’s labor law coverage is crucial. The policy not only provides defense costs but also covers any damages awarded to the injured employee. Again, because the general contractor and project owner are listed as additional insureds, they are afforded protection under the subcontractor’s insurance. This setup helps prevent the general contractor and project owner from facing significant out-of-pocket expenses or an increase in their own insurance premiums.
The Importance of Proper Coverage
These examples illustrate the importance of having the right insurance in place. Without adequate coverage, a subcontractor could face devastating financial consequences, and the general contractor and project owner could be left exposed to significant liability. That’s where the expertise of BGES Group comes into play.
BGES Group specializes in New York construction insurance and understands the intricacies of action over claims. They work closely with contractors to ensure they have the necessary coverages, including general liability, umbrella liability, business auto and workers’ compensation insurance. With BGES Group’s help, contractors can obtain quality insurance at competitive pricing, giving them peace of mind on every project.
For more information on how BGES Group can help protect your construction business, contact Gary Wallach at 914-806-5853 or bgesgroup@gmail.com.
BGES Group is one of New York, New Jersey, and Connecticut’s Construction Insurance Specialists representing 50+ companies, including all the BEST general & umbrella liability programs. We offer all the coverage needed, including property, builders’ risk, inland marine, general liability, umbrella liability, auto, bid & performance bonds, workers’ compensation, N.Y.S. disability, and group health. Our commitment to you goes beyond the policies we provide. We are always just a call, text, or email away, ready to assist you, even on weekends. We understand the importance of your business and are here to help you navigate any insurance challenges.
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