New York labor laws are pro-plaintiff. That’s why it’s troublesome if someone is sued in relation to an employee’s accident. It’s also the reason why general contractors and property managers that employ subcontractors should consider liability coverage for 3^rd party injury claims that may be excluded from their commercial general liability insurance policies.

Action-over claims insurance covers you in the event your injured worker or your subcontractor’s injured worker collects worker comp benefits and then directs a liability claim against the property owner who then passes the responsibility to you.  

Explaining the Action-Over Claim

To clarify the concept of an action-over claim, this scenario is given.

As per protocol, a property management company signed an indemnification agreement when it was hired to service an apartment building owner. The agreement assigned all work-related risks onto the property management company.

One day, a worker fell off a ladder and broke his leg in three different spots. The severely injured worker did the following:

a)  He first filed a workers comp claim with the management company’s subcontractor, enabling him to receive immediate reimbursement of medical costs, as well as loss of income compensation.

b)  After applying for workers comp benefits, he could no longer bring a class action suit against his employer for the life-altering injury, but he could file a hazardous jobsite lawsuit against the , which he did.

According to the terms of the indemnification agreement, the management company had agreed to take responsibility for any work-related accident, so the apartment building owner forwarded the related $3 million lawsuit to the management company.

If the management company in this example had an action-over claims exemption in his general liability policy, the insurance company would have denied coverage. The lawsuit, after all, was filed against the apartment owner and not their insured (the management company). But if the management company had acquired action-over claims coverage, the insurance company would be required to take ‘action’ over the general ‘claim’ process and protect their insured from the 3^rd-party lawsuit. 

The following may simplify the concept further.

1. Injured worker receives workers comp benefits from boss, the sub-contractor
2. Injured worker files third-party lawsuit against property owner for $3 million damages
3. Property owner passes liability over to contractor, the management company, as per indemnification agreement
4. Property manager submits third-party liabilityclaim to insurance company
5. Insurance company rejects claim if there is an action-over claims exclusion in commercial liability policy. Management company is required to pay damages out of pocket.
   or
6. Insurance company will cover claim if there is action-over claims coverage.

For more about insurance matters and how it relates to the NY contractor, speak to an experienced independent insurance agent.

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Summary: Because NY laws favor the worker, insurance for the contractor is very expensive. It’s also the reason why most commercial general liability coverage has an action-over claims exclusion. Here’s a clear explanation what action-over claims insurance coverage is about and why the contractor or property manager should consider adding it to a policy.