According to the International Risk Management Institute (IRMI), Action Over is a legal action involving an injured employee, when after collecting workers compensation benefits from the employer, decides (most often at the guiding hand of counsel) to pursue a third party for allegedly contributing to the employee's injury.

In construction claims, there is almost always a nondelegable duty of a general contractor to provide a safe workplace. This will then trigger a whirlwind of document and contract exchanges between you, as a subcontractor and your insurance company. There will be questions of the validity of the defense and indemnification language in the contracts, and as now the case with many Property & Casualty carriers, a position will not be taken based upon a Letter of Representation by the injured party, but only upon the filing of litigation.

Often the contractual liability section within the General Liability (GL) policy form leaves the employer exposed to suits against their GL policy via the Employers Liability (EL) exclusion. More plainly stated, this is when a subcontractor injured on a jobsite files a claim against his Workers Compensation carrier and then also files a claim against the General Contractor responsible for hiring the subcontractor. The subcontractor brings the "action over" back to the General Contractor.  This exclusion does not apply to liability assumed by the insured under an insured's contract, which leaves the General Contractor (GC) vulnerable.  You as the subcontractor will be the first person from whom that GC seeks protection.

If the GC and the subcontractor have a written hold harmless or indemnification agreement, the GC may be held liable in an action over lawsuit. This also may apply to a temporary employee hired by the employer. It is because of the growing number of these cases reaching the Courts that contracts and the language contained within are of the utmost importance.

It is extremely important that standard contracts receive regular reviews and updates to comply with changes in State and common law that could impact your business.  It is also important that you discuss with your agent each and every particular situation that varies from the norm of your day-to-day business, no matter how great the potential the opportunity may seem to offer.  Contracts that are one-sided may require the investment of time spent with a trusted attorney before execution. Unilateral contracts benefit the offering party. Make your decisions ones of full forethought, analyzing the long-term ultimate exposures you may be taking before signing on the dotted line.

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This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2023 Zywave, Inc. All rights reserved.